Gold & Silver

Gold marks over 1-week high, but US rate hike prospects curb gains

Reuters Bengaluru | Updated on January 08, 2018 Published on October 10, 2017

Gold prices inched up to their highest in more than a week on Tuesday, drawing support from geopolitical tensions and a softer dollar, but expectations of another US Federal Reserve interest rate hike this year weighed on upside momentum.

Spot gold was up 0.2 per cent to $1,286.86 an ounce by 0339 GMT, after earlier in the session touching its best since late September at $1288.19. US gold futures for December delivery climbed 0.3 per cent to $1,289.30 per ounce.

Geopolitical tensions and uncertainty around what US President Trump might do about North Korea kept a certain degree of risk aversion alive in markets, and that was providing temporary support to gold prices, said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

Fed rate hike prospects

A softer dollar on Tuesday was also lending support but growing expectations that the Fed would raise interest rates again this year checked gold's gains. Federal funds futures showed traders were pricing in a nearly 90 per cent chance of a US interest rate hike in December.

Higher interest rates tend to boost the dollar and weigh on the greenback-denominated gold. “Most of the central banks are going to tighten or have renormalisation of monetary policy in the post-financial-tsunami era. This point is really restraining the upside for gold prices. I think $1,300 should be a resistance level,” To said.

ECB stimulus taper

The European Central Bank should reduce its asset buys from next year with the aim of ending them altogether, the bank's executive board member Sabine Lautenschlaeger had said on Monday, just weeks before policymakers decide whether to curb stimulus.

“We still reiterate our view ... that the precious metal will likely remain under pressure over the short-term, as we see a firmer dollar, resilient equity markets, rising interest rates and slightly more quieter geopolitical conditions, all combining to keep serious rallies in check,” INTL FCStone analyst Edward Meir said in a note.

Reuters technical analyst Wang Tao sees spot gold still targeting $1,299 per ounce, as it has broken a resistance at $1,281.

In other precious metals, silver rose 0.5 per cent to $17.02 an ounce, having hit a two-week high of $17.06 earlier. Platinum was up 0.4 per cent to $915.55 an ounce. Palladium was little changed at $929.22 an ounce.

Published on October 10, 2017
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