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Gold ends higher on drop in U

Gold ends higher on drop in U.S. stock market, but rising bond yields limit gains

Wed Oct 10 2018


Gold futures settled with a modest gain on Wednesday, finding support from a drop in the U.S. stock market, though rising bond yields, which hovered near their steepest since 2011, limited the rise for the precious metal.


December gold GCZ8, +0.24% tacked on $1.90, or 0.2%, to settle at $1,193.40 an ounce, extending its rise to a second straight session. December silver SIZ8, -0.22%  fell 7.4 cents, or 0.5%, to $14.326 an ounce, giving up the 0.5% gain it saw a day earlier.


The ICE U.S. dollar index DXY, -0.22% was down 0.2% at 95.46, though it remains nearly 4% higher this year so far, contributing to a roughly 9% drop for gold over the same stretch. The yield on the U.S. 10-year Treasury note TMUBMUSD10Y, -0.48%  rose nearly 3 basis points to 3.237%.


“Gold is holding steady in a narrow range as the ‘big’ dollar pulls back from its seven-week high – support remains strong for the dollar on the back of a strong U.S. economy and expectations of steady interest-rate hikes by the Fed,” said Dean Popplewell, vice president of market analysis at Oanda.


The Federal Reserve has already increased rates three times in 2018 and is expected to lift benchmark rates a fourth time in December, as well as continue its gradual tightening trend in 2019, according to the Fed’s own forecasts.


Because precious metals — often used as a haven by investors — don’t offer a yield, the commodity is vulnerable to a slump in a rising-rate environment. That climate also tends to lift the dollar, dimming the appeal of U.S.-priced gold to investors using other currencies. But stock markets are also vulnerable to rising bond yields and any sign that equity markets are in fast retreat could again resume interest in gold, analysts say.


Should the S&P 500 SPX, -3.29% end lower on Wednesday, it would mark its fifth straight loss and its longest streak of losses since November 2016.


Among economic data released Wednesday, the wholesale cost of U.S. goods and services snapped back in September, but the level of inflationary pressure appears to have eased.


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