Gold price steady, investors weigh US rate moves against fiscal outlook

New York (Nov 16)  Gold prices were steady on Thursday as investors weighed the impact of an expected rise U.S. interest rates against uncertainty about the direction of U.S. fiscal policy.

Gold is highly exposed to interest rates and returns on other assets, as rising rates lift the opportunity cost of holding non-yielding bullion.

Spot gold was flat at $1,278.10 per ounce at 1100 GMT, after touching a 3-1/2-week high of $1,289.09 on Wednesday.
US gold futures for December delivery were also barely changed at $1,278.

Gold has traded in a tight range of about $24 in November. Tom Kendall, ICBC Standard Bank precious metals strategist,
said gold was stuck in a range with the prospect of a rise in U.S. interest rates exerting pressure, while uncertainty about the direction of U.S. fiscal policy offered support.

"The two are kind of pushing and pulling on global yields and on the gold price," he said.
    Traders see a 96.7 percent chance the U.S Federal Reserve
will raise rates at its Dec. 13 meeting, CME Group's FedWatch
showed. It would be the Fed's third rate rise this year.
    At the same time, the U.S. Senate and House are considering
tax cuts proposed by President Donald Trump's administration.
           
    In economic news, underlying U.S. consumer prices increased
in October, strengthening the view that a recent disinflationary
trend worrying the Fed probably had ended.              
    Veteran Fed policymaker Eric Rosengren said on Wednesday
that falling unemployment and sustained growth meant the economy
had accelerated beyond a sustainable level so the Fed should
continue raising rates.              
    Another Fed policymaker, Charles Evans, said he would go
with an open mind to next month's meeting.            
    "It is perhaps best to remain sidelined for now, as the gold
complex seems to be trapped within a relatively tight trading
range and has yet to assert a meaningful direction," INTL
FCStone analyst Edward Meir said in a note.
    In physical demand, a note by BMI Research expected China's
gold production growth to slow over the years to 2026, on the
back of depleting reserves and rising production costs.
    "Undervalued overseas companies faced with debt and credit
crunches will incentivise more overseas investment by Chinese
gold miners," BMI Research added.
    Meanwhile, world share prices gained as investors hunted for
bargains after Europe's longest losing streak of the year and
the worst run since March for top global indices.           
    In other precious metals, palladium broke a
five-session losing streak, rising 0.4 percent at $988 an ounce,
after touching a two-week low on Wednesday.
    Silver gained 0.4 percent at $17 per ounce and
platinum slipped 0.3 percent to $928.70.