Gold price tips higher with help from risk-off mindset across markets

November 13, 2017

London (Nov 13)  Gold futures ticked higher Monday even as a leading dollar index, which usually moves inversely to the yellow metal, traded in positive territory.

Metals, currencies and interest-rate markets appeared to consolidate levels in early action after a volatile week that accompanied waning confidence for economy-boosting U.S. tax reform. Stocks stalled their record run Monday amid the tax uncertainty, and this risk-off positioning was mildly beneficial to haven gold.

December gold GCZ7, +0.34% gained $4.90, or 0.4%, to $1,279.10 an ounce. The contract retreated sharply to finish at $1,274.20 an ounce Friday, down 0.7% for its biggest one-day drop in some two weeks. That move came a day after gold posted its highest finish since Oct. 16, according to FactSet data. Amid such volatility, the metal managed last week to book its first weekly gain of the past four. The exchange-traded SPDR Gold Trust GLD, -0.82%  gained 0.3% premarket Monday.

The ICE U.S. Dollar Index DXY, +0.02% which measures the buck against six rivals, traded just in the green, near 94.51. The index fell sharply late last week, logging its biggest decline since Oct. 10 on Thursday, according to FactSet data. That move came as the Senate’s tax-cut proposal underwhelmed markets, providing a lift to commodities priced in the currency.

And, the yield on the 10-year Treasury TMUBMUSD10Y, -0.78%  slipped to 2.372% Monday.

Gold is expected to continue to largely track the dollar and Treasury yields, with weakness in both likely underpinning the non-yielding yellow metal.

“Problems surrounding the tax reform bill may put downward pressure on Treasury yields, which would tend to hurt the dollar,” said Marshall Gittler, chief strategist at ACLS Global. “I think tax reform may once again be the dominant theme for the dollar this week and is likely to result in a further decline in the currency.”

The Senate Finance Committee is due to start working on the tax reform bill during the week. Republicans had initially hoped to hold a final vote on the bill by Thanksgiving next week, but analysts expressed some doubt at the timeline.

Demand for the metal has been supported this year by geopolitical risks including North Korea’s nuclear ambitions. Yet headwinds, from dollar strength to expectations for higher U.S. interest rates, have kept spot gold pinned in a range right around its 100-day moving average, lately at $1,277.

In other metals trading, silver for December delivery SIZ7, -0.01% added less than 1 cent, or 0.1%, to $16.885 an ounce. The exchange-traded iShares Silver Trust SLV, -0.75%  was up 0.2%.

Palladium continued to pull back from the 16-year highs hit last week. The December contract PAZ7, -0.28%  fell $2, or 0.2%, to $991.10 an ounce. It settled last Wednesday at $1,015.85—the highest since February 2001. January platinum PLF8, +0.12% gained $2, or 0.2%, to $934.10 an ounce.

December copper HGZ7, +0.08%  gained less than a penny, or 0.3%, to $3.084 a pound after it logged a weekly decline of 1.3%.


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