Gold prices bounce back after October loss as Fed conclusion awaits
London (Nov 1) Gold futures on Tuesday snapped back from a tough October, while the dollar dipped, as the Federal Reserve was set to settle in for a two-day meeting.
That meeting, while not expected to produce an interest-rate hike, could shed light on the chances for such a move by the end of the year, a potentially gold-negative development.
Gold futures for December delivery on Comex GCZ6, +1.17% traded up $9.60, or 0.8%, to $1,282.70 an ounce. A close at this level would mark the highest for the contract since Oct. 3. The yellow metal booked a 3% drop for October.
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December silver SIZ6, +2.58% rose 27 cents, or 1.5%, to $18.04 an ounce. Silver prices fell more than 7% last month.
Gold and silver gained as the U.S. dollar lost ground versus major rivals. That left the ICE dollar index DXY, -0.31% , a measure of the U.S. unit against a basket of six major rivals, down 0.1% at 98.23. A stronger dollar can weigh on commodities priced in the currency, including precious metals, by making them more expensive to users of other currencies. A weaker dollar, then, tends to give gold and silver a boost.
U.S. stocks were poised to rebound Tuesday after strong Chinese manufacturing data instilled more confidence in global growth and sent global stock markets higher, dulling demand for haven gold.
Gold trading could churn between now and Wednesday’s Fed conclusion.
“The Fed has tried to convey that November is a live meeting, but it’s dead on arrival. Markets see almost no chance of a rate hike, and we put the odds at 5%,” said Ryan Sweet, economist at Moody’s Economy.com, in a commentary. “The meeting is the week before the election; raising rates then would break from past practice. Since the Fed began announcing changes to the target fed funds rate in 1994, only once, in 2004, has it raised rates at the meeting before a presidential election.”
“We expect the Federal Open Market Committee to strengthen the forward guidance in its November post-meeting statement to signal that a rate hike is likely in December,” Sweet added.
Read: Fed expected to tee up December interest-rate hike
Higher interest rates tend to be a negative for gold and other assets that don’t pay interest. 10-year Treasury yields TMUBMUSD10Y, +1.08% logged their largest monthly rise in October since June 2015. But any signs that the Fed is falling behind the curve in preventing an inflation flare-up could send some investors into gold for cover.
Nonfarm payrolls and other labor market data for October is due on Friday and will also be closely watched for signs the Fed is likely to move in December. Tuesday’s calendar, meanwhile, includes the Market PMI reading, the Institute for Supply Management index on factory activity, construction spending and auto sales data.
Gold demand remains underpinned over the long haul, Peter Boockvar, chief market analyst at The Lindsey Group, told metals firm Kitco in a video interview at the New Orleans Investment Conference.
“Gold is not a commodity, it is and always has been a currency and it will likely be the last currency standing ... I’m of the belief that we’re at the end game of this post-WW II monetary regime and the activity of central bankers, in their extreme monetary policy, is what eventually ends this,” he said. “I’m not calling for a gold standard, I’m just saying gold will be part of whatever comes next.”
In other metals trade Tuesday, January platinum PLF7, +1.29% rose $8.00, or 0.8%, to $986.60 an ounce, while December palladium PAZ6, +2.32% added $8.85, or 1.4%, to $626.90 an ounce.
High-grade copper for December delivery HGZ6, +0.02% rose less than 1 cent, or 0.1%, to $2.21 a pound.
As for exchange-traded funds, the SPDR Gold Trust GLD, +0.70% rose 0.3% premarket, while the VanEck Vectors Gold Miners ETF GDX, +2.20% traded up 0.8%.
Source: MarketWatch
