Gold prices pause the downdraft as inflation data, dollar action in focus

November 14, 2018

London (Nov 14) Gold prices were pinned near unchanged levels Wednesday, a pause in selling action that had driven the metal down for seven sessions in the past eight.

December gold GCZ8, +0.02%  changed hands at $1,201.40 an ounce. The finish at this level Tuesday marked the lowest for a most-active contract since Oct. 10, according to FactSet data.

December silver SIZ8, -0.16%  slipped a penny, or less than 0.1%, at $13.965 an ounce. Its settlement Tuesday at $13.977 was the lowest settlement for a most-active contract since January 2016.

Read: Billion-dollar monthly boost in exchange-traded fund gold holdings offer ray of hope for downbeat metal

The consumer-price index number will be released Wednesday, “and a strong gain in that number could bring in more selling in the metals on the same theme, though we suspect that the rate hike expectations may have already peaked,” analysts at Zaner Precious Metals said.

A strong dollar has been driving gold lower. The ICE U.S. Dollar Index DXY, +0.15% a measure of the U.S. currency against six major rivals, was up 0.2% at 97.16. Its push above 97.57 earlier this week was the index’s highest level since June of 2017, according to FactSet data. The gauge has climbed about 5.7% year to date, partly boosted by expectations for further tightening by the Federal Reserve. The Fed is expected to raise rates next month and thrice in 2019. Higher interest rates can boost the dollar and dull demand for dollar-denominated commodities.

Gold’s value as a safety asset may come back into fashion as risk-on investing becomes chaotic in 2019. At least that’s the featured theme in Wednesday’s MarketWatch Need to Know column.

“Being long gold has been a tough investment since 2012, and so often, when we see the yellow metal gaining traction, the [U.S. dollar] regains its mojo, and we see the inevitable reversal,” writes Chris Weston, head of research at Pepperstone Group, in the call of the day featured in the column. “However, as we look into our crystal ball and gaze into 2019, emerging warning signs can be seen that suggest 2019 could be the year where gold bulls finally get their day in the sun.”


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