Gold Prices Edge Lower as Interest-Rate Concerns Resurface
Gold prices wobbled between small gains and losses Thursday after recent interest-rate concerns that have stalled this year's rally re-emerge.
Gold for December delivery was recently down less than 0.1% at $1,276.10 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices are on track for a fourth-straight week of losses and have fallen more than 5% since hitting their highest level in more than a year in early September, in large part because of the Federal Reserve's renewed commitment to raise interest rates again this year.
On Thursday, Federal Reserve Bank of San Francisco President John Williams expressed confidence inflation would rise to the central bank's 2% target, warranting gradual rate increases. With inflation remaining below 2% this year, some investors had been anticipating that the Fed might be more cautious with rate increases, boosting the outlook for gold because the precious metal struggles to compete with yield-bearing assets like Treasurys when borrowing costs rise.
But the central bank recently has renewed its commitment to raise rates four times by the end of next year, a major factor in stalling the rally in gold prices. Investors and analysts are now trying to determine whether the recent pullback is nearing an end as the gold market continues to digest the most recent Fed signals.
"I think it has reacted to Fed comments recently, but I can't help but think to some degree it's already been factored in," said James Steel, chief precious-metals analyst at HSBC.
Recent Fed comments have helped the dollar rebound from multiyear lows hit last month, weighing on gold by making the precious metal more expensive for foreign buyers. The WSJ Dollar Index, which tracks the U.S. currency against 16 others, recently was up 0.3% and on track for a fourth-straight week of gains.
Investors were also keeping an eye on Catalonia's move toward independence from Spain, as many favor gold and other haven assets amid geopolitical turbulence. Some have said an escalation in the conflict between the U.S. and North Korea or another unforeseen event might be necessary to induce fear in the market and push investors back toward gold.
"I wouldn't say the market is immune to geopolitical risk, but it's not quite as impressed with it as it was earlier in the year," Mr. Steel said.
Among base metals, copper for December delivery rose 2.6% to $3.0365 a pound, on track for its best day in weeks. Prices have retreated nearly 5% from their highest level in nearly three years hit early last month, but have bounced back this week amid concerns that Freeport McMoRan Inc.'s deal with the Indonesian government over control of a giant mine in the country could hit snags.
Similar supply disruptions have buoyed copper prices this year.
Gold prices wobbled between small gains and losses Thursday after recent interest-rate concerns that have stalled this year's rally re-emerge.
Gold for December delivery closed down 0.3% at $1,273.20 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices have fallen in six of the past eight sessions and are on track for a fourth straight week of losses -- they have shed more than 5% since hitting their highest level in more than a year in early September, in large part because of the Federal Reserve's renewed commitment to raise interest rates again this year.
On Thursday, Federal Reserve Bank of San Francisco President John Williams expressed confidence inflation would rise to the central bank's 2% target, warranting gradual rate increases. With inflation remaining below 2% this year, some investors had been anticipating that the Fed might be more cautious with rate increases, boosting the outlook for gold because the precious metal struggles to compete with yield-bearing assets like Treasurys when borrowing costs rise.
But the central bank recently has renewed its commitment to raise rates four times by the end of next year, a major factor in stalling the rally in gold prices. Investors and analysts are now trying to determine whether the recent pullback is nearing an end as the gold market continues to digest the most recent Fed signals.
"I think it has reacted to Fed comments recently, but I can't help but think to some degree it's already been factored in," said James Steel, chief precious-metals analyst at HSBC.
Recent Fed comments have helped the dollar rebound from multiyear lows hit last month, weighing on gold by making the precious metal more expensive for foreign buyers. The WSJ Dollar Index, which tracks the U.S. currency against 16 others, recently was up 0.4% and on track for a fourth-straight week of gains.
Many investors were waiting on Friday's jobs report for the latest reading on the U.S. economy.
Investors were also keeping an eye on Catalonia's move toward independence from Spain, as many favor gold and other haven assets amid geopolitical turbulence. Some have said an escalation in the conflict between the U.S. and North Korea or another unforeseen event might be necessary to induce fear in the market and push investors back toward gold.
"I wouldn't say the market is immune to geopolitical risk, but it's not quite as impressed with it as it was earlier in the year," Mr. Steel said.
Among base metals, copper for December delivery rose 3% to $3.0465 a pound -- its best day in more than two months. Prices have retreated nearly 5% from their highest level in nearly three years hit early last month, but have bounced back this week amid concerns that Freeport McMoRan Inc.'s deal with the Indonesian government over control of a giant mine in the country could hit snags.
Write to Amrith Ramkumar at Amrith.Ramkumar@wsj.com
(END) Dow Jones Newswires
October 05, 2017 14:57 ET (18:57 GMT)