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Gold flirts with fresh 5-week highs as Fed pacing is unclear

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January 9th, 2017

Gold futures gained Monday, retesting five-week highs, as the dollar’s advance was limited and global investors continued to debate the expected pace for U.S. interest-rate hikes in 2017.

February gold GCG7, +0.53%  gained $6.60, or 0.6%, to $1,180.10 an ounce. A close at this level would mark the highest for the yellow metal since the last week of November. For the week through Friday, gold tallied a 1.8% advance, according to FactSet data, back-to-back weekly gains after a long string of weekly declines were their worst in 12 years.
TimeGold - Electronic Feb 2017Mar 16May 16Jul 16Sep 16Nov 16Jan 17
US:GCG7
$1,100$1,200$1,300$1,400$1,000

Meanwhile, March silver SIH7, +0.52%   rose 5 cents, or 0.3%, at $16.57 an ounce after it logged a roughly 3.3% advance for last week. March copper HGH7, -0.67%  bucked the crowd to slip 2 cents, or 0.6%, to $2.53 a pound after it was up about 1.6% for last week.

The ICE U.S. Dollar Index DXY, -0.18%  , a measure of the currency against six rival currencies, rose 0.1%. A stronger buck makes assets priced in the currency, including most gold on the global markets, more expensive to buyers using other monetary units. Gold and the dollar typically move inversely but can break that relationship, especially if the dollar index’s move is small, as it was so far on Monday.

Stock futures signaled a slow start Monday as the Dow’s 20,000 target draws ever closer again. A spate of upcoming earnings and a full docket of Federal Reserve speakers kept some investors in wait-and-see mode, which was mildly supportive to haven gold.

Boston Fed President Eric Rosengren is due to speak at 9 a.m. Eastern, followed by Atlanta Fed President Dennis Lockhart in Atlanta at 12:40 p.m. Eastern. More central bank officials will step up throughout the week, including Fed Chairwoman Janet Yellen, who is set to appear at a town hall-style event in Washington on Thursday at 7 p.m. Eastern.

A press conference from President-elect Donald Trump is also likely to attract investor attention. His first news conference since July is scheduled for Wednesday, Jan. 11.

Read: Get ready for an historic ‘fiscal shock’ as the Dow sets up for another run at 20,000

Gold is likely to continue to track the dollar inversely as global markets assess how aggressive the Fed will be with interest rates this year. Higher rates boost the dollar; they also leave nonyielding gold less appealing to investors chasing yield.

The Fed had indicated in December that at least three rate increases were in the offing for 2017, according to a forecast of interest rates from members of the central bank, known as the dot-plot.

“Overall, we maintain our view that the Fed is likely to hike borrowing costs twice this year, in line with current market pricing, according to the Fed funds futures,” said Charalambos Pissouros, senior analyst, with IronFX Global.

“We believe that the change in voting rights within the [Federal Open Market Committee] has turned the committee somewhat more dovish this year, making the case for three hikes seem rather doubtful,” he said.

In other trading, palladium futures rose, with the March contract PAH7, +0.57%  up $1.90, or 0.3%, at $760.25 an ounce. Prices for the metal logged a weekly gain of roughly 11%, which would be the largest since the week ended March 6, FactSet data show.

Analysts at precious-metals consultancy Metals Focus said in a recent report that “automotive demand should post another record high,” driven by healthy demand in China and the U.S. Palladium is used in automobile catalytic converters. Part of the metal’s expected climb will also likely be “at the expense of platinum’s use in diesel catalysts in Europe,” the analysts said.

April platinum PLJ7, +0.25%   changed hands at $978 an ounce, up $7.40, or 0.8%—ending 7.2% higher for last week.

In exchange-traded funds, the SPDR Gold Trust GLD, +0.64%   was up 0.6% premarket, while the iShares Silver Trust SLV, +0.70%  rose 0.2%. The VanEck Vectors Gold Miners ETF GDX, +1.23%   rose 1.6%.

 - MarketWatch.

 

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See Also: Gold News Blog,  Gold, Copper, Silver, Platinum
Gold futures gained in New York as concern about slowing growth drove equities lower and boosted demand for the metal as an alternative investment.