Gold logs modest rebound from 9-month low

Gold prices on Monday logged a modest rebound from the nine-month low set last week as the highflying dollar cooled its advance.

Gold futures slid Friday to their lowest finish since February. The yellow metal was undercut by dollar strength and growing expectations that the Federal Reserve won’t only announce an interest-rate increase at its meeting in December but could also signal a quicker pace of rate increases next year. This sentiment pulled prices for the metal down for a second consecutive week.

On Monday, gold futures for December delivery GCZ6, +0.68%  rose $1.10, or 0.1%, to settle at $1,209.80 an ounce, though the finish was off the session’s high of $1,217.80. Gold had lost about 1.3% last week, to settle at $1,208.70 Friday—the lowest finish since mid-February, according to FactSet data.

The ICE U.S. Dollar Index DXY, -0.01%  traded 0.1% lower Monday, after rising on Friday for a 10th straight day to hit 101.54, its highest since April 2003.

“Bets on a steeper Fed rate hike path after the U.S. presidential election have undermined demand for anti-fiat and non-interest-bearing assets,” including gold, said Ilya Spivak, currency analyst with Daily FX. “A lull in top-tier news flow may allow for a corrective retracement in the week ahead, but prices will probably remain highly sensitive to headline risk as the [President-elect Donald] Trump cabinet takes shape.”

Higher rates tend to dull demand for nonyielding gold while a richer dollar leaves gold priced in the U.S. currency less attractive to buyers using other currencies. Gold has largely slumped since Election Day and the surprise presidential election win for Donald Trump, after which investors turned, albeit cautiously, to riskier investments. The Dow industrials has climbed about 3%, the S&P 500 has gained 2% and the Nasdaq has risen nearly 3% since the election.

“Every new president gets a honeymoon and boy is Trump getting one,” Ross Norman, chief executive offer at Sharps Pixley, told MarketWatch. “The interpretation of the gold price action (and by extension in the dollar and equities) is that the outsider, the maverick, the anti-establishment Trump just might be what is required to get the economy motoring.”

Norman said that gold is seeing “really excellent physical buying, especially here in Europe which is to be expected with the sharp price correction following the rally of the U.S. dollar to a 13-year high.”

Looking ahead, he said that the “issue that preoccupies us…is the vulnerability and fragility of the macroeconomic environment and many of the leading financial institutions within it.”

“Will they fail? Hopefully not, but it is a case of hoping for the best and preparing for the worst,” said Norman. “With that in mind, a good allocation to gold remains a wise thing and that has been vindicated by gold’s price performance in 2016.” Gold futures trade roughly 14% higher year to date.

Meanwhile, expectations that a Trump administration could usher in greater infrastructure spending has fed expectations for higher industrial metals demand.

December copper HGZ6, +1.85%  rose 4.8 cents, or 1.9%, to $2.515 a pound. Copper had shot higher in the immediate wake of the election but ended last week about 1.6% lower, while December silver SIZ6, +1.93% ended down by 10.3 cents, or 0.6%, on Monday at $16.521 a pound.

January platinum PLF7, +1.33%  rose $14.50, or 1.6%, to $936.50 an ounce, while December palladium PAZ6, +1.22% slipped $1.25, or 0.2%, to $726.55 an ounce.

“The euphoria over increased demand for metals in the U.S. following Donald Trump’s election victory appears to have returned, though we regard this as premature,” said Carsten Fritsch and his commodities analysis team at Commerzbank, in a note. “After all, it is not clear how many of his election promises Trump will actually be able to implement.”

The Commerzbank analysts said cooler real-estate prices in China in October could weigh on the economy, cutting demand for industrial metals there.

The U.S. Commodity Futures Trading Commission statistics show that the rise in metals prices, and above all in the copper price, after the U.S. election was driven to a major extent by speculators: net long positions on Comex in New York were expanded by 19% to a record high of 70,600 contracts in the week to November 15, the Commerzbank analysts added.

Within exchange-traded funds, the SPDR Gold Trust GLD, +0.37% was up 0.1%, while the iShares Silver Trust SLV, -0.06% shed 0.4%. The VanEck Vectors Gold Miners ETF GDX, +2.04% traded 1.4% higher.


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