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Gold settles higher as U

Gold settles higher as U.S. dollar index falls to a nearly 3-week low

Tue Nov 14 2017

 

Gold settled higher Tuesday for a second consecutive session, buoyed by a drop in a key U.S. dollar benchmark index to its lowest level in almost three weeks.

 

Uncertainty over the outlook for U.S. tax reform and its potential impact in supercharging the economy also supported the metal’s move higher, hitting investor risk appetite and underpinning gold’s value as a haven asset.

 

December gold GCZ7, -0.16% tacked on $4, or 0.3%, to settle at $1,282.90 an ounce after trading as low as $1,269.70. The exchange-traded SPDR Gold Trust GLD, +0.21%  edged up by 0.5%.

 

Prices have traded in a relatively narrow range after firmer moves last week. Gold’s 1% drop on Friday was the sharpest single-session tumble in roughly two weeks, but that move came a day after it posted its highest finish since Oct. 16, according to FactSet data.

 

Weakness in the buck supported gold prices Tuesday. The ICE U.S. Dollar Index DXY, +0.04% which measures the buck against six rivals, eased by nearly 0.8% to 93.786. It hasn’t traded at levels this low since late October. The index also fell sharply late last week. A weaker dollar boosts gold as the falling currency makes the dollar-priced bullion more attractive to investors using another currency.

 

The yield on the 10-year Treasury TMUBMUSD10Y, -0.56%  fell 1.2% Tuesday, paring its month to date gain down to 0.4%. As Treasury yields decline, gold, which doesn’t bear a yield, tends to benefit.

 

Early Tuesday, gold prices hit a low at $1,270 after the “higher than expected PPI,” said Jeff Wright, chief investment officer at Wolfpack Capital. “One month is [a] blip, two readings a trend—and not positive for gold or silver,” he said.

 

December silver SIZ7, -0.16% traded lower after the data, but turned higher, settling up 2.6 cents, or 0.2%, at $17.073 an ounce. The exchange-traded iShares Silver Trust SLV, -0.06%  traded up 0.2%.

 

The PPI rose 0.4% in October, the Labor Department reported Tuesday. That was well above the MarketWatch forecast of a 0.1% gain. The increase in the PPI pushed the 12-month rate of wholesale inflation up to 2.8%, the highest since February 2012.

 

Following the data, Wright said he expects the U.S. Federal Reserve to “move up the first rate increase of 2018 to February at the latest. So there’s likely to be one in December, with the next rate hike in early 2018, he said, adding that the Fed “will fight inflation at all costs.”

 

As for tax policy, Treasury Secretary Steven Mnuchin late Monday ruled out any increase in the corporate tax rate to above 20% in an interview at The Wall Street Journal CEO Council event. “It’s not going up,” Mnuchin said.

 

Meanwhile, at a European Central Bank conference, Fed Chairwoman Janet Yellen said “central banks are loath to provide” information on the path of policy and when changes will be made in asset purchases or policy path. “Market participants are looking for greater certainty about the policy path than central bankers think is appropriate to offer most of the time,” she said, leaving financial markets to wait for further clues on global interest rates. Her appearance is only part of a heavy lineup of Fedspeak this week.

 

On Tuesday, St. Louis Fed President James Bullard said there’s no need to lift interest rates because inflation isn’t likely to return to the Fed’s target soon.

 

In other metals trading, December palladium PAZ7, +0.25%  fell 0.4% to $985.55 an ounce, after settling last Wednesday at $1,015.85—the highest since February 2001. January platinum PLF8, +0.28% shed 0.9% to $927.30 an ounce. December copper HGZ7, -0.55%  lost 1.7% to $3.065 a pound.

 

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