Gold price fights to shake off back-to-back weekly declines
London (Sept 25) Gold futures prices ticked higher Monday, limping their way out of back-to-back weekly losses as financial market participants kept tabs on lofty U.S. stock prices, a spate of Federal Reserve speakers and largely quieted geopolitical rumblings.
December gold GCZ7, -0.12% GCZ7, -0.12% rose about 40 cents, or less than 0.1%, to $1,297.70 an ounce, having slipped last week beneath the psychologically significant level of $1,300 for the first time in September. For last week, gold declined more than 2%, according to FactSet data.
The exchange-traded SPDR Gold Shares ETF GLD, +0.46% bobbed between a narrow gain and loss premarket Monday after it shed 2% last week.
Although markets have been relatively muted after recent military tensions between North Korea and the U.S. and its allies, gold does remain underpinned by its haven status as a hedge against a sudden escalation in geopolitical tension. Japanese leader Shinzo Abe on Monday called a snap general election in a bid to consolidate power in the midst of a diplomatic crisis with North Korea, according to media reports.
Gold is also considered a counter to what some market participants have described as lofty levels for U.S. equities potentially ripening for a correction. The Dow Jones Industrial Average DJIA, -0.04% and the S&P 500 index SPX, +0.06% recently touched all-time highs, but looked to kick off the week with a sluggish start.
Gold managed its slim gain even as the ICE U.S. Dollar Index DXY, +0.50% which measures the buck against a half-dozen currencies, was up 0.2%. The two markets often move inversely as a weaker dollar can make commodities pegged to the currency, including most of the world’s gold, more appealing to buyers using weaker monetary units.
The dollar gained the most against the euro, which was under pressure after a heavy drop in support for mainstream parties in Germany’s general election on Sunday left the way forward for German Chancellor Angela Merkel’s conservative alliance in doubt.
“The result of the general election in Germany—the country saw a shift towards the right and forming a government is likely to prove difficult—has left the gold price cold as the new week gets underway,” said Carsten Fritsch and the commodities team at Commerzbank, in a commentary.
“The U.S. dollar appreciated because the election result in Germany will presumably make it hard to realize the European policy notions put forward by French President Macron,” the group said, in its note. “The political risks—not only in the eurozone—are likely to contribute to solid demand for gold, however. No serious progress has been made in the Brexit negotiations, either.”
MarketUpdate
