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Gold recoups a slice of recent losses

Gold recoups a slice of recent losses

Wed Jan 10 2018

 

Gold prices settled higher Wednesday, recouping some of their recent losses after briefly tapping a nearly four-month intraday high as the dollar weakened against major rivals.

 

February gold GCG8, -0.08%  advanced $5.60, or 0.4%, to settle at $1,319.30 an ounce after tapping a high of $1,328.60—the highest intraday level since Sept. 15, FactSet data show. The move follows two sessions of declines. The exchange-traded SPDR Gold Shares GLD, +0.24%  was up 0.3%.

 

The ICE U.S. Dollar Index DXY, +0.13% —a gauge of the greenback against a half-dozen rivals—slid 0.3% on the heels of a three-session uptrend for the currency. The dollar fell more than 1% against the yen USDJPY, +0.38%  after the Bank of Japan’s move this week to trim long-dated government bond purchases. That set up the U.S. currency for its biggest two-day pullback against the yen in some eight months.

 

Because most commodities are priced in dollars, weakness in the currency can provide support for assets like gold, boosting their appeal among buyers using stronger currencies. Weakness in the U.S. stock market can also lure investors back to the precious metal.

 

“Many investors feel the stock market is greatly overvalued, and that taking some money off the table might be a solid move strategically,” said Michael Kosares, founder of gold broker USAGOLD. Given that, gold “offers strong upside potential and limited downside risk.”

 

The recent downdraft for the dollar, meanwhile, comes as a number of Federal Reserve members have stirred some doubt about the pace of interest-rate increases in 2018—with some pointing to it potentially exceeding the two or three that the market has priced in—due to concerns that recent fiscal stimulus measures could overheat the economy.

 

Gold gained even as the yield for the 10-year benchmark note TMUBMUSD10Y, -0.54%  climbed as much as 3.1 basis points to 2.59%. Higher yields, which move opposite bond prices, typically dull the appeal of nonyielding bullion, but the dollar held more weight in the commodity’s move Wednesday.

 

Bonds extended a selloff after Bloomberg reported that China is considering halting or cutting its purchases of U.S. government paper. Sources told the news outlet that China found that U.S. bonds were becoming less attractive and that trade tensions with the U.S. could provide a reason to stop buying American government paper.

 

“A major supply of bonds from the U.S., the U.K., Japan and Germany is hitting the market at a time when concerns are being raised that the bull market in bonds, which has lasted for more than 25 years, could be coming to an end,” said Ole Hansen, head of commodity strategy, at Saxo Bank. “Overall, however, real yields, an important driver for gold, remain rangebound, with rising U.S. nominal yields being offset by rising inflation expectations.”

 

In other metals trading, March palladium PAH8, +0.23%  fell 1.9%, to $1,077.40 an ounce. It cleared $1,098 a day earlier for a settlement that was the highest on record, based on FactSet data going back to 1984.

 

Sister metal platinum saw its April contract PLJ8, -0.17%  gain 0.7% to $978.80 an ounce. Meanwhile, March silver SIH8, -0.03%  rose 0.2% to $17.035 an ounce, while the iShares Silver Trust SLV, -0.06% rose less than 0.1%.

 

March copper HGH8, +0.39%  tacked on 0.6% to $3.236 a pound.

 

Source: https://www.marketwatch.com/