Gold prices set to pull back from roughly 4-month high

December 5, 2018

New York (Dec 5)  Gold futures headed lower on Wednesday, looking to snap a two session streak of gains, a day after the commodity settled at its highest level since July on the back of dollar weakness.

Gold for February delivery GCG9, -0.22%  was $4.70, or 0.4%, lower at $1,241.90 an ounce, following its highest finish for the contract since July 25, FactSet data show. March silver SIH9, -0.27%  traded 8 cents, or 0.6%, lower at $14.56 an ounce, after that metal ended 1% higher on Tuesday.

“Traders are watching two important events in the coming days,” the ongoing developments on Brexit and how this factor can trigger a bigger move in the market and Friday’s U.S. nonfarm payroll data, said Naeem Aslam, chief market analyst at ThinkMarkets UK.

“If the Brexit vote is not approved, this will be a risk-off event for the market and we could see the price of gold moving higher,” he said. “Similarly, a soft U.S. NFP reading will only add fuel for this rally.”

Read: Theresa May absorbed three sharp blows Tuesday as steward of U.K.’s Brexit process

U.S.-based equity and interest-rate futures and options products traded on the CME CME, +0.05%  were closed Wednesday in observance of the national day of mourning for former President George H.W. Bush. However, CME commodity markets operated on a regular trading schedule, while U.S.-based risk markets were largely darkened.

Against that backdrop, assets including gold, may see volatile action, given lighter-than-usual trading, market participants said.

Some market participants were attributing gold’s retreat on the session to investors selling some of their holdings after Tuesday’s healthy gain.

“With risk sentiment stabilizing, well kind of, the gold market is taking some profits,” wrote Stephen Innes, a head of trading at Oanda, in a Wednesday research report. “Overall its time to hit the pause button until markets open until after the day of mourning,” he said.

Concerns about a lasting cessation of hostilities between President Donald Trump and Chinese President Xi Jinping after the pair approved a 90-day moratorium between Beijing and Washington on tariff tensions, and signs that bond investors hold a dim long-term outlook for markets, have combined to upend risk appetite.

Meanwhile, the ICE U.S. Dollar Index DXY, +0.04% was up nearly 0.1% at 97.11. Typically, a stronger buck dulls investment demand for dollar-priced commodities, like gold, and vice versa.

Later in the week, job-market data, a key report for the Federal Reserve ahead of its last rate-setting meeting of 2018 Dec. 18-19, will come into focus. See economic calendar

In other metals trading, March palladium PAH9, +0.42% rose 1.3% to $1,195.40 an ounce—set to extend its run of record settlements.

January platinum PLF9, -0.32%  fell by 1.3% to $793.70 an ounce and March copper HGH9, +0.54%  added 0.3% to $2.767 a pound.


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