Gold Builds on Rally as Investors Doubt Fed’s Appetite for Rate Hikes

Posted by jbrumley on January 5, 2017 8:33 AM
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Traders focus on Fed officials’ “considerable uncertainty” over economic impact of Trump’s fiscal spending plans

By Sara Sjolin, MarketWatch

Gold futures rose for a third straight day on Thursday as the dollar continued to slide after minutes from the Federal Reserve’s December meeting unsettled investors’ expectations about the pace of interest rate rises.

Gold for February delivery gained $8.20, or 0.7%, to $1,173.50 an ounce, setting it on track for its highest settlement since Dec. 7. On Wednesday, it added $3.30, or 0.3%, for the session to settle at $1,165.20 an ounce — the highest finish since Dec. 12, according to FactSet data.

The gains came after minutes from the central bank’s Dec. 13-14 meeting out Wednesday showed Fed officials are grappling with “considerable uncertainty” about the possible impact on the U.S. economy of President-elect Donald Trump’s fiscal stimulus plans.

Investors appeared to be pulling back on their hopes for a more aggressive pace of rate hikes after Fed policy makers “pointed to a number of risks that, if realized, might call for a different path of policy than the currently expected,” according to the minutes.

Higher interest rates can be a negative for gold, which tends to benefit from looser monetary policy. The minutes also sent the dollar sharply lower and as the greenback extended its decline Thursday, it offered dollar-denominated gold some support.

“Gold has moved into recovery mode, a move which coincides with the dollar moving into correction. I had been skeptical of the late December rally, however, each day this week the gold price has been pulling higher and the recovery is gathering pace,” said Richard Perry, market analyst at Hantec Markets, in a note.

“I do though remain cautious with chasing gold too far higher as bear market rallies have been continually sold into over the past few months,” he added.

Gold prices have now advanced in seven out of the last eight sessions. They appear to be staging a mini rally in the wake of a downtrend in December that was sparked by expectations that Trump will enact policies that may be bullish for stocks but less favorable to assets considered as havens, such as gold.

In exchange-traded products, the SPDR Gold Trust (GLD) rose 0.8% in U.S. premarket trade, the VanEck Vectors Gold Miners ETF (GDX) gained 1.4% and the iShares Silver Trust (SLV) inched 0.5% higher.

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Silver for March delivery advanced 8 cents, or 0.5%, to $16.64 an ounce on Thursday.

April platinum rose 1% to $956.70 an ounce, while March palladium slid 1.4% to $728.45 an ounce.

March copper picked up 0.1% to $2.56 a pound.

Courtesy of MarketWatch

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