Gold price struggles even as the strong dollar takes a breather

October 31, 2017

London (Oct 31)  Gold retreated slightly Tuesday, putting a third-straight climb at risk, as the yellow metal fought its way off the more than two-month lows hit late last week.

The metal’s action remains closely linked to dollar moves, although their typically inverse relationship took a break early Tuesday, with markets zoned in on tax policy, the Federal Reserve leadership announcement, the Russian election meddling probe and more.

December gold GCZ7, -0.27% slipped $2.90, or 0.2%, to $1,274.90 an ounce. It did settle higher Friday and Monday. Notably, gold’s finish at $1,269.60 last Thursday was the lowest since Aug. 8, according to FactSet data. That handed the metal a loss of around 0.6% for last week, its sixth weekly retreat out of the past seven. The SPDR Gold Trust GLD, +0.19%  slipped 0.2% in premarket trading Tuesday.

Gold has largely been taking its cues from dollar action over recent sessions.

“Besides any further news we may get on the Russian investigation this week, the White House announced yesterday that it will introduce an initial tax reform bill on Wednesday, while media reports suggest Trump will declare his choice for Fed Chair on Thursday. Considering that this week also includes an [Fed interest-rate] decision on Wednesday and the U.S. employment report [hits] on Friday, traders will probably have their hands full for the next days,” said Charalambos Pissouros, senior analyst at IronFX.

Read: Fed statement may have treats for the hawks and the doves

The ICE U.S. Dollar Index DXY, +0.11%  was up 0.1% at 94.65. This closely tracked dollar index climbed to a more than three-month high Friday as more signs emerged then for progress on President Trump’s promised tax cuts, a factor that has rallied the U.S. currency and driven stocks to record highs, depressing gold’s price. Since that rally, questions over the aggressiveness of tax cuts have arisen, with talk of a phased-in approach to corporate breaks hitting markets Monday.

“We view the risks surrounding the dollar from all these events as likely tilted to the downside. In terms of tax cuts, media reports yesterday suggested that the highly-anticipated reduction in the corporate tax rate may not take full effect until 2022, something likely to weigh on [stocks and the dollar] if confirmed,” Pissouros said.

The dollar index had pared gains and gold recovered somewhat after several media reports said President Donald Trump is leaning toward appointing Fed Gov. Jerome Powell to be the next chairman of the central bank. Powell and Stanford economist John Taylor have been seen as the two front-runners for the top Fed job. Trump is expected to announce his choice Thursday.

Among other metals, December silver SIZ7, -0.04%  traded at $16.835 an ounce, down 0.1%, or about 1 cent. The iShares Silver Trust SLV, -0.25%  traded nearly flat.

December copper HGZ7, -0.05%  gained 0.1% to $3.116 a pound. January platinum PLF8, -0.34%  slipped 0.4% at $919.00 an ounce, and December palladium PAZ7, +0.88%  gained 0.5% to $967.20 an ounce.


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