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Published: Wed, November 16, 2016
Economy | By Melissa Porter

Gold Prices Gyrate, Buffeted by Dollar, Stocks

Gold Prices Gyrate, Buffeted by Dollar, Stocks

USA gold futures were up 0.25 percent at $1,224.60.

However, two factors have primarily driven prices lower since then - strengthening expectations of an interest rate hike by the Fed and the implications of the outcome of the US presidential election.

Spot gold slipped about 0.1 percent to $1,224.10 an ounce at 0041 GMT.

For now, with gold below key support at $1,250 an ounce, both Baruch and Beauchamp see the path of least resistance as lower for the yellow metal. The dollar rose to an 11-month high against a basket of major currencies. The US ten-year Treasury yields rose to 2.3%-the highest level since December 2015.

A broad sell-off in global commodities and surging bond yields had seen the metal dipping almost 3 percent on Friday.

Bill Baruch, senior market analyst at iiTrader, said that Trump's acceptance speech and comments after meeting President Barack Obama have given him a more statesmanlike image.

"Our FX strategists believe the U.S. dollar is set to break new highs after consolidating through much of 2016, driven by the president-elect favouring infrastructure spending and tax cuts, as well as the increased likelihood of higher rates in 2017-18", said Standard Chartered in a note.

The Federal Reserve is widely expected to raise interest rates in December, in the light of the steady improvement in USA employment data.

On the other hand, the increased chances of an interest rate hike in December 2016 also weighed on precious metal prices.

Fed Chair Janet Yellen is due to testify on the economic outlook before the U.S. Congress Joint Economic Committee on Thursday, while retail sales and inflation data will also be in the spotlight.

Gold bears are making big bets that Trump's plans for fiscal stimulus, including a $500 billion infrastructure spending program, will lead to strong United States economic expansion, higher interest rates and a number of prominent hedge fund managers and billionaires running family offices have moved aggressively out of gold and into stocks.

Holdings in gold-backed exchange-traded funds fell 4.88 metric tons to 1,966.3 tons as of Monday, capping the biggest three-day drop in more than three years, data compiled by Bloomberg show. Palladium was up 0.7 percent at $693.20 an ounce. The metal touched its lowest since June 8 at $16.61 an ounce in its previous session.

Platinum XPT= was down 1.2 percent at $928.50, after falling to $917.50, the lowest since late-February.

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