Gold price slips, heads for weekly decline, even as the dollar index droops

New York (Nov 24)  Gold slipped Friday as investors pocketed some of the yellow metal’s strong pre-Thanksgiving gain.The metal unhinged from its typically inverse relationship to the dollar, which remained lower in the wake of Federal Reserve signals for a cautious approach to interest-rate tightening into next year.

December gold GCZ7, -0.33% was down $4.90, or 0.4%, to $1,287.40 an ounce. After a see-saw week, the yellow metal was on track to log a roughly 0.4% weekly decline. The exchange-traded SPDR Gold Trust GLD, -0.25%  slipped 0.3% premarket.

The ICE U.S. Dollar Index DXY, -0.10%  was down less than 0.01% at 93.10. It’s down about 0.6% for this week and has shed nearly 9% so far this year. Gold and the dollar typically trade inversely as moves in the U.S. unit can influence the attractiveness of commodities to holders of other currencies.

Gold prices ended sharply higher Wednesday on the back of a weaker dollar, and moved up in electronic trading after minutes from the Federal Reserve’s November meeting hinted that the central bank may not be as aggressive in raising interest rates next year as expected. A December hike is largely priced in to financial markets.

The Fed in early November viewed a “near-term” increase in interest rates as likely, but policy makers also expressed more alarm about persistently low inflation. That raises the question of whether the Fed will stick to three planned rate increases in 2018.

Still, analysts believe the debate over the next chapter for interest rates is far from settled.

“The dropoff we’ve seen in the dollar since the release of the minutes suggests traders are anticipating a slower tightening process in response to the minutes, although I remain unconvinced,” said Craig Erlam, senior market analyst with Oanda. “When you consider how well the economy has performed over the last couple of quarters, the strength of the labor market and the likelihood that tax reform will pass, there’s plenty of reason to expect interest rates to rise and, in turn, the dollar.”

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

December silver SIZ7, -0.57% fell 15 cents, or 0.9%, to $16.96 an ounce. The exchange-traded iShares Silver Trust SLV, +1.00%  fell 0.4%. Silver headed for a 1.2% drop for the week, which would mark its first weekly drop in the last three.

Trading was mixed elsewhere as December copper HGZ7, +0.96%  firmed 0.8% to $3.165 a pound, while January platinum PLF8, -0.27%  fell 0.5% to $936 an ounce, on track for its first weekly decline in three, and December palladium PAZ7, +0.14%  rose 0.3% to $1,004.50 an ounce. Palladium has climbed roughly 1.7% this week.

MarketWatch

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