Gold prices rise for the session, but end the week lower

October 28, 2017

New York (Oct 28)  Gold finished higher on Friday, finding some support from uncertainty surrounding the next U.S. Federal Reserve chief, but prices held on to a loss for the week as upbeat economic data buoyed the dollar.

A key dollar index climbed to a more than three-month high on Friday after more signs emerged for progress on President Trump’s promised tax cuts, a factor that has rallied the U.S. currency and driven stocks to record highs.

But the index pared gains after a report from Bloomberg 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.

Powell “would be positive for gold as he is in the dovish camp,” in favor maintaining low interest rates, said Jeff Wright, chief investment officer at Wolfpack Capital. Trump is expected to announce his choice before starting a trip to Asia on Nov. 3.

December gold GCZ7, +0.39% tacked on $2.20, or 0.2%, to settle at $1,271.80 an ounce, reversing course after earlier losses in the wake of government data showing a 3% reading for U.S. gross domestic product in the third quarter. The final reading for U.S. consumer sentiment index was at 100.7—the strongest reading in 13 years.

“U.S. economic news flow has markedly firmed relative to forecasts since mid-June, opening the door for an upside surprise that stokes tightening bets further and compounds pressure on the yellow metal,” said Ilya Spivak, commodities and currency strategist with Daily FX.

GDP was the last major piece of economic data before the Fed’s policy-setting meeting next week, a gathering that’s not expected to produce a rate increase but could set the table for a final rate increase of the year in December.

Gold’s finish at $1,269.60 Thursday was the lowest since Aug. 8, according to FactSet data. It lost around 0.6% for the week, which marked its sixth decline in seven weeks. The SPDR Gold Trust GLD, +0.47%  rose 0.3%, but traded 0.7% lower for the week.

The ICE U.S. Dollar Index DXY, +0.17%  was up 0.4% at 94.989 after trading as high as 95.15, its highest level since July, according to FactSet data. That means the index is set for a 1.4% weekly jump, the biggest such climb of 2017.

The greenback strengthened as the euro continued to slide after the European Central Bank said this week that it will extend its quantitative-easing program, likely furthering the gap between European and U.S. government bond yields.

Meanwhile, the benchmark 10-year Treasury yield TMUBMUSD10Y, -2.13%  moved lower after the report that Trump favors Powell as Fed chief. Gold, which doesn’t bear interest, typically moves in the opposite direction to U.S. bond yields.


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