Gold gains as risk aversion weighs on dollar
Thu Dec 06 2018
Gold edged higher on Thursday as
growing risk aversion weighed on the dollar, while palladium held ground at a
premium to the bullion.
Spot gold was up 0.2 percent at
$1,239.86 per ounce, as of 0429 GMT, while U.S. gold futures were 0.2 percent
higher at $1,244.9 per ounce.
“Markets are trying to
consolidate, trying to push up higher for now,” said Benjamin Lu, a commodities
analyst with Phillip Futures.
A balance between a host of
factors such as a rate hike by the U.S. Federal Reserve in December,
uncertainty about trade tensions between Washington and Beijing, and a
flattening yield curve has helped create a premium for the bullion, Lu added.
Fed policymakers will gather at a
Dec. 18-19 meeting, at which the central bank is widely expected to raise
interest rates.
“Although a rate hike is already
priced in, markets will be closely watching the meeting for clues on rate hike
timings in 2019,” said Lukman Otunuga, a research analyst at FXTM, adding that:
“if the meeting echoes a similar message to (Chairman Jerome) Powell’s dovish
shift, gold has the potential to shine into 2019.”
The dollar declined against the
safe-haven yen as a spike in risk aversion pressured equities and U.S. Treasury
yields. The spread between the two-year and five-year Treasury yields inverted
this week and the two-year/10-year spread was at its flattest in more than a
decade amid a sharp fall in long-term rates. [US/] [MKTS/GLOB]
“An yield curve inversion
indicates higher borrowing cost in short term, so for safe-haven assets in the
longer run it’s going to be very positive,” Phillip Futures’ Lu said.
Spot gold may test a resistance
at $1,245 per ounce, a break above which could lead to a gain into a range of
$1,253-$1,258, according to Reuters technical analyst Wang Tao.
Meanwhile, palladium continued to
be more valuable than gold after outshining the yellow metal for the first time
since 2002 on Wednesday, with prices soaring by around 50 percent in less than
four months to record levels.
Spot palladium rose 0.1 percent
to $1,245.00 per ounce, hovering near its record high hit in the previous
session.
The market now awaits Friday’s
U.S. non-farm payrolls data for November, which is expected to show
unemployment remains at 3.7 percent.
“Investors are seen adopting a
cautious stance ahead of the U.S. jobs report which could offer insight over
the health of the U.S. labour force,” said FXTM’s Otunuga.
Amongst other metals, silver fell
0.7 percent to $14.41 per ounce, while platinum extended losses into a third
session, declining 0.7 percent to $795.00 per ounce.
Source: Reuters