Gold prices headed higher Monday after scoring their first weekly advance in seven, with the U.S. dollar so far failing to rebound from a sharp decline last week.
The precious metal and the U.S. currency continued their inverse relationship Monday, with December gold
GCZ8, +0.17%
up $2.70, or 0.2%, at $1,216 an ounce as a leading dollar index
DXY, -0.34%
fell 0.3% to 94.828. Gold often trades higher when the dollar weakens, and vice versa, because the precious metal is traded in the greenback.
Gold on Friday added $19.30, or 1.6%, to settle at $1,213.30 an ounce—for its highest finish in three weeks and largest one-day percentage climb since March, according to FactSet data based on the most-active contract. Gold logged a gain of about 2.5% for the week.
The ICE U.S. Dollar Index, the popular indexed measure of the buck against six rivals, was down 1% for last week, which was the sharpest weekly slump since February. It was still up 0.3% for August so far as rising interest rates increase the opportunity cost of holding nonyielding gold, while boosting the dollar, in which gold is priced.
Federal Reserve Chairman Jerome Powell, at the annual Fed symposium in Jackson Hole, Wyo., said gradual U.S. interest-rate hikes remain appropriate and there was no risk to the economy overheating. He also said he was prepared to do “whatever it takes” if inflation becomes unanchored to the upside or downside “or should crisis threaten again.”
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Gold’s rebound above $1,200 is “a direct consequence of the words of Fed Governor…Powell, who talked of a gradual rate increase for 2019, fueling expectations of a softening of the U.S. monetary policy,” said Carlo De Casa, chief analyst at U.K.-based online broker ActivTrades, in an emailed note.
Meanwhile, one of the bigger unknowns for the economy is trade and tariffs. The Wall Street Journal reported that the U.S. and Mexico were close to reaching an agreement on key issues holding back a renegotiation of the North American Free Trade Agreement.
Analysts had been watching gold’s ability to hold the $1,200 line after the market had tilted decidedly bearish based on short positions, or bets that an asset’s price will fall.
“The fact that market participants had previously been very pessimistic towards gold is also likely to have contributed to the price rise [last week],” said analysts at Commerzbank, led by Carsten Fritsch, in a note. They sited Commodity Futures Trading Commission stats that showed net short positions were further expanded to 90,000 contracts in the week to Aug. 21.
“As in the weeks before, it was mainly a question of short positions being increased while longs remained virtually unchanged. Some of the short positions are likely to have been covered at the end of last week, especially after the price exceeded the $1,200 mark,” the analysts said.
As for the demand side, the analysts are keeping tabs on India. The All Kerala Gold & Silver Merchants Association in the state of Kerala, the country’s biggest gold-buying state, expects gold demand to plummet by half in September due to the flood damage, the Commerzbank team noted.
Among exchange-traded funds, SPDR Gold Shares
GLD, +0.35%
added 0.4% Monday after trading just under 2% higher for last week. The VanEck Vectors Gold Miners ETF
GDX, +1.50%
was up 1.6%.
September silver
SIU8, +0.21%
rose 4.1 cents, or 0.3%, to $14.835 an ounce. The contract climbed 1.7% Friday and was up 1.1% for last week.
High-grade copper for September delivery
HGU8, +0.39%
was up 0.5% at $2.713 an ounce , while October platinum
PLV8, +1.82%
tacked on 1.9%, to $804.20.40 an ounce and September palladium
PAU8, +1.73%
added 1.6%, to $943.80 an ounce.
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Source : MTV
