Gold prices flirt with lowest level in 10 months as rate hike looms
New York (Dec 5) Gold prices slumped Monday, approaching their lowest trading level since February, as prospects for a rate increase later in the month by the Federal Reserve and the possibility that monetary policy might tighten at an accelerated pace in 2017 weighed on the metal.
The decline in gold came despite concerns sparked by Italy’s referendum result, which would typically result in haven demand for the asset and other precious metals.
On Sunday, Italian voters rejected constitutional reform, leading Prime Minister Matteo Renzi to announce he will resign. Safety plays such as gold often get a lift from political uncertainty, but there wasn’t much of that early Monday, perhaps because the “no” vote had been expected to win in Italy.
See: ‘Another victory for the antiestablishment’ and other analyst takes on Italy’s vote
“Gold profited only briefly at the start of the week from the result of the constitutional referendum in Italy,” said Commerzbank analysts led by Carsten Fritsch in a note.
But comments from a Fed member on Monday may be the biggest driver for gold moves.
New York Fed President William Dudley, in a speech addressing the economic outlook and monetary policy in New York City on Monday, said the Fed wasn't far from its policy goals, backing gradual rate hikes. Although, rate hikes are widely expected by Wall Street, hawkish comments from Dudley, who has been a longstanding dove on monetary policy, might be enough to further pressure gold prices.
US:GCG7
$1,000$1,100$1,200$1,300$1,400
Gold futures for February delivery GCG7, -0.41% were down 1.4%, or $16.90, to $1,160.90 an ounce, after earlier trading as high as $1,190.20, according to FactSet data. The metal is approaching its lowest levels since February, according to FactSet data.
“The precious metal, which gapped higher on its open, is trading much lower than its previous close, which confirms the signs of weakness,” said Naeem Aslam, chief market analyst with Think Markets. “The near term support is at 1160 and the resistance is at 1181.”
Gold’s sister metal, silver, was also getting bludgeoned. March silver SIH7, -0.37% was off 1.2%, or 20 cents, to $16.63 an ounce.
European stocks and other riskier assets initially sold off after the news from Italy, but the Stoxx Europe 600 SXXP, +0.56% was recently trading higher. U.S. stock futures ESZ6, +0.38% rose, with the Dow Jones Industrial Average DJIA, +0.13% setting a all-time intraday trading high.
The ICE U.S. Dollar Index DXY, -1.38% was off 0.3% compared with its level late Friday. Ordinarily weakness in the buck makes those commodities more attractive for holders of other currencies.
Among exchange-traded funds, the SPDR Gold Trust GLD, -0.43% traded 1.3% lower in premarket action and the iShares Silver Trust ETF was off 0.5%.
On Friday, gold futures settled 0.7% higher, but still suffered a small loss for the week.
Source: MarkewtWatch
