Metals Stocks: Gold ticks higher as traders weigh tax-cut prospects, rate hikes

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Gold futures traded slightly higher on Friday, but was on track for a modest weekly loss, as traders weighed the likelihood of success for Republican tax-cut proposals and continued to factor in expectations for another rate increase by the Federal Reserve before year-end.

Gold for December delivery on Comex GCZ7, +0.25%  was up $2.90, or 0.2%, to $1,291.60 an ounce, while December silver SIZ7, +0.11%  added 3 cents, or 0.1%, to $16.865 an ounce.

For the week, gold was looking a decline of 0.5%, while silver futures were on track for a decline of 0.7%. Over the past three months,however, gold is set for an advance of 3.7%, while silver is looking at a gain of 1.8%.

“With the dollar likely to appreciate further, amid rate hike expectations and optimism over tax reforms, gold remains vulnerable to further losses,” said Lukman Otunuga, research analyst at FXTM, in a note

The U.S. dollar and Treasury yields were expected to continue calling the tune for gold. Yields have risen significantly this week as Treasurys sold off, allowing the dollar to gain ground versus major rivals. A stronger dollar can weigh on commodities priced in the currency as it makes them more expensive in other currencies. The ICE Dollar Index DXY, -0.16% a measure of the U.S. unit against a basket of six major rivals, was flat Friday but on track for a 1% weekly rise.

But some analysts saw room for gold to bounce.

While a stronger dollar has pressured gold, holdings of large gold exchange-traded funds have increased, said Naeem Aslam, chief market analyst at Think Markets UK, in a note. The SPDR Gold Shares ETF GLD, +0.19%   was off 0.8% for the week, and but has rallied 3.3% so far this quarter.

“It clearly shows that smart money is actually busy in hedging their risk while the gold price drops. The 30-day volatility index for the gold price has also surged and this provides an evidence that the shining metal could bounce soon,” he said.

Aslam sees near-term support at $1,266 an ounce.

On the data front, consumer spending rose 0.1% in August, matching expectations. However, If adjusted for inflation, spending fell for the first time since January. Personal income climbed to an above-forecast 0.2%, and the PCE index, the Fed’s preferred inflation gauge, increased 0.1% in August.

In other metals trade, January platinum PLF8, -0.11%  fell $2.50, or 0.3%, to $923.20 an ounce, while December palladium PAZ7, +0.48%  rose $2.25, or 0.2%, to $930.10 an ounce. December copper HGZ7, -0.42%  fell 0.4% to $2.97 a pound.