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February
06
2018

Gold tips higher in recovery mode, defying higher yields and stable dollar
David Haggith

Silver futures edge higher, but palladium loses more than 1%

Gold futures tipped higher Monday, attempting to rebound from last week’s losses, when stronger U.S. hiring and wage data lifted the dollar and Treasury yields. Those moves came on the belief that the Federal Reserve could turn more aggressive in its approach to interest rates.

U.S. stocks traded mostly lower Monday, part of a broader global equity selloff

“Should this rout in the stock market continue, gold may continue under pressure as the ‘sell everything’ to raise cash mantra unfolds,” said Peter Hug, global trading director at Kitco Metals Inc. 

April gold GCJ8, +0.10% edged up $1.60, or 0.1%, to $1,338.90 an ounce. The contract shed 1.5% last week, according to FactSet data. That trimmed its year-to-date gain to 1.8%. 

March silver SIH8, +0.04% tacked on 9.1 cents, or 0.5%, to $16.80 an ounce. It logged a 4.2% weekly decline last week. The exchange-traded SPDR Gold Shares GLD, +0.18% was up 0.2%, while the silver-focused iShares Silver Trust SLV, +0.83% added 1.6% in Monday dealings.

“Buying of gold [based on Commitment of Traders reports] continued for a 7th week, albeit at a modest pace,” said Ole Hansen, head of commodity strategy at Saxo Bank. “This happened after the yellow metal once again found resistance above $1,350 an ounce, with an adverse spike in real yields only being partly offset by emerging stock market weakness.”

Gold gained even as the ICE U.S. Dollar Index DXY, +0.23%  moved up 0.3% to 89.48, after hitting three-year lows last week. Dollar-priced gold often moves inversely to the buck.

The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +1.17%  has eased back from the session’s best level, but at one point reached as high as 2.883%.

The 10-year yield has been trading around levels last seen four years ago, after Friday’s monthly jobs report revealed a jump in wage growth. That stoked inflation fears and in turn, concerns that the Fed will increase interest rates faster than expected. Jerome Powell formally took over as chairman of the Federal Reserve on Monday, replacing Janet Yellen.

Analysts have stressed that while inflation risk drives up bond yields in a way that could prove negative for nonyielding bullion, it also restores investor faith in gold as a hedge.

Plus: A new report says the unemployment rate may have a lot more room to fall

Gold prices briefly traded a bit lower Monday after data showed that the Institute of Supply Management nonmanufacturing index surged in January to a 13-year high.

Meanwhile, Federal-fund futures are currently pricing in Wall Street expectations of a nearly 80% probability of a quarter-percentage-point increase to a key interest rate at the March 20-21 Fed meeting, according to CME Group data. The Fed collectively has penciled in three total hikes in 2018, but the likelihood of that pace remains open to debate.

 

 

Myra P. Saefong, reporter & assistant editor for MarketWatch, has covered the commodities sector for more than 15 years.

 

www.marketwatch.com