Gold price trades at lowest in more than a week, on track for monthly gain

November 30, 2017

New York (Nov 30)  Gold prices eased Thursday, leaving futures on track for their lowest close in more than a week and shaving a touch off the yellow metal’s November gain.

February gold GCG8, -0.23% fell $2.10, or 0.2%, to $1,284.10 an ounce. The contract, which settled Tuesday at $1,299.20—the highest since Nov. 17, ended Wednesday at its lowest since Nov. 21, according to FactSet data. Based on front-month futures trading, gold is on track to gain about 1% for November as a leading dollar index declines. The exchange-traded SPDR Gold Trust GLD, -0.63%  fell 0.2% premarket.

The ICE U.S. Dollar Index DXY, +0.05%  was up 0.2% at 93.40. The ICE index is on track to drop 1.4% for the month of November, which would be its worst performance since a 2.9% slide in July, according to FactSet data.

Even as the dollar gained, the pound rallied anew on Thursday after The Times newspaper reported that Brexit negotiators were nearing a breakthrough on the issue of the Northern Ireland border, making it possible for the EU to offer a fast-tracked transition deal to the U.K. by January. That helped dull some demand for haven gold.

Progress over the tax overhaul will remain a key focus for traders. The Senate voted on Wednesday to open a formal debate on the Republican tax bill, and a final vote could arrive as soon as Thursday evening. A big sticking point is over the corporate tax rate and whether or not it should be cut by less than U.S. President Donald Trump wants.

As for data, weekly jobless claims are due at 8:30 a.m. Eastern, along with readings on personal income, consumer spending and core inflation, within the Fed-preferred personal consumption expenditure index, for October. The Chicago purchasing managers index for November is due at 9:45 a.m. Eastern.

“Gold prices continue to take direction cues from Fed rate hike speculation. This time around, the spotlight is on the PCE inflation gauge—policymakers’ favorite price growth yardstick—as well as the fate of Republican-led tax cut plan in the U.S. Senate,” said Ilya Spivak, currency and commodities analyst at Daily FX.

“Markets continue to expect tax cuts to boost inflation, forcing the Fed into a steeper tightening cycle in 2018,” he said. “If the Senate manages to pass their version of reform, opening the door for reconciliation with a House of Representatives version, gold may decline. An expected PCE uptick may help drive prices downward.”

Gold began to sell off early Wednesday, while departing Fed Chairwoman Yellen testified at her last congressional hearing and said inflation was likely to return to the 2% target. That supported expectations for an interest-rate hike at the central bank’s next meeting in two weeks. After gold prices settled for the session, the Fed Beige Book, a report that provides anecdotal evidence about U.S. economic conditions, said inflation pressures “have strengthened.”

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 nonyielding bullion. Financial markets have largely priced in a December rate increase, but they’re less certain about whether the Fed will be able to deliver on a projected three rate increases for next year.

Elsewhere on Comex, March silver SIH8, -0.22% traded fractionally lower at $16.560 an ounce. The exchange-traded iShares Silver Trust SLV, -1.70%  fell 0.2%.

March copper HGH8, +0.54%  was little changed at $3.0885 a pound, while January platinum PLF8, +0.55%  was up 0.7% to $947.40 an ounce. March palladium PAH8, -0.59%  eased 0.01% to $1,008.35 an ounce. It has pulled back since hitting $1,020.65 an ounce on Tuesday—another more than 16-year high.


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