Global gold prices steady, but Fed rate hike concerns weigh
Gold prices held steady on Monday, but hovered near a one-week low hit in the previous session, as largely upbeat US economic data reinforced the prospects of another rate hike by the Federal Reserve next month.
Spot gold was nearly unchanged at $1,269.11 per ounce as of 9.39am after edging lower earlier in the session. On Friday, the precious metal touched a one-week low of $1,265.16. US gold futures for December delivery gained 0.1% to $1,269.80.
US jobs growth accelerated in October, although wage growth was tepid, adding to the Fed’s assessment last week that “the labor market has continued to strengthen”, with the sluggish wage data doing little to change expectations.
Markets are increasingly confident the Fed will hike interest rates in December, which has weighed on the precious metals complex, said Jordan Eliseo, chief economist at gold trader ABC Bullion. Traders see a 90.2% chance of a rate hike at the central bank’s next meeting, according to Thomson Reuters data.
Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.
“The strengthening of the dollar due to strong US data has kept gold prices in check. The movement has been quite consistent trading within $1,275 an ounce range,” said Brian Lan, managing director at dealer GoldSilver Central in Singapore.
The dollar touched its highest level in nearly eight months versus the yen on Monday.
The dollar index, which measures the greenback against a basket of six major currencies, last stood at 94.938, trading within sight of a 27 October peak at 95.150, a more than three-month high.
“Gold seems to have found some safe haven support after the initial sell-off as the street nervously watches developments in Saudi Arabia...,” said Jeffrey Halley, a senior market analyst with OANDA.
Saudi Arabia’s future king tightened his grip on power over the weekend through an anti-corruption purge by arresting some members of the kingdom’s political and business elite.
Analysts said the yellow metal could also find support after US President Donald Trump, who kicked off a 12-day Asia trip, looked to present a united front with Japan against North Korea.
Meanwhile, holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.03% to 845.75 tonnes on Friday.
Hedge funds and money managers reduced their net long position in COMEX gold contracts for the seventh straight week, in the week to 31 October, US Commodity Futures Trading Commission (CFTC) data showed on Friday.
Among other precious metals, spot silver inched 0.2% higher to $16.84 an ounce, platinum rose 0.4% to $921.80, while palladium was up 0.1% at $998.20. Reuters