Gold futures dropped on Tuesday
Gold futures declined on Thursday as a leading dollar index, twisted in mixed trading, as the metal has so far failed to find the haven bid that could be expected alongside a sharp tumble in early stock trading.
Gold prices have been consolidating for several sessions as they set at their highest level since July earlier this week, reaching this level mostly on the back of the week-to-date weakness of the dollar.
“If gold was ever going to stage a meaningful rally it will be now: stocks and yields are falling and dollar is isn’t doing too great either, apart from against commodity currencies, owing to the ongoing risk-off trade,” said Fawad Razaqzada, technical analyst with Forex.com.
Yet in recent trading, gold for February delivery GCG9, +0.03% dropped $1.10, or 0.1%, to $1,241.50 an ounce. March silver SIH9, -0.84% declined 13 cents, or 0.9%, to $14.45 an ounce.
The ICE US dollar ICE Index DXY, -0.10% last dropped below 0.1% and spent some time in positive and negative territory, on a weekly decline of 0.2%. Typically, a stronger buck dulls investment demand for dollar-priced commodities like gold, and vice versa. The dollar had drawn safety buying of late when global stock markets are roiled.
US stock futures declined on Thursday after sales were so strong that circuit breakers were triggered, after the arrest of a China-based Huawei executive reignited the trade concerns that helped drag equities to their worst sessions since the beginning of October earlier this week.
Worries about a possible US recession and inversion of at least part of the Treasury yield curve, with 10-year Treasury yields TMUBMUSD10Y, -1.01% on a three-month low below 3%, pushed the US dollar. In turn, gold has recovered about 7% of the 19-month lows reached in August.
Some signs of the “golden asylum” status, fulfilling expectations, appeared in the stock data of the stock exchanges.
The gold-funded ETFs benefited in November from continuing global volatility in stock markets, from the weak performance of other commodities such as oil and geopolitical developments, the World Gold Council announced in a statement Thursday morning.
U.S. dollar flows into gold-backed ETFs, including the popular SPDR Gold Shares GLD, +0.35% are now positive for the year, having raised $354 million in November, a second straight month for inflows, the WGC reported. U.K. inflows to gold ETFs were also strong as Brexit concerns have ramped up alongside a softening in sterling, said Juan Carlos Artigas, the WGC’s director of investment research. The SPDR Gold Shares was down 0.2% early Thursday after closing up 0.6% Wednesday.
““As market volatility continued and commodities like oil underperformed, global gold-backed ETFs saw a second month of inflows, rising by $804 million [in total] and reflecting a full reversal of what had been an outflow trend on the year,” Artigas said.
Job-market data, a key report for the Federal Reserve before the last 2018 rate-setting meeting of this year on Dec. 18-19 will be on focus on Friday. ADP announced on Thursday that private employers added 179,000 jobs in November, according to economists’ forecasts.
Attention remains on economic data for signs that Fed may be sticking to its plan for continued modest rate increases – a gold-negative factor – into early next year. Markets have lost some confidence in Fed’s likelihood to stick with this projected rate-hike path.
“We expect rising precious metals prices next year because the U.S. dollar is likely to depreciate when the Fed rate hikes come to an end,” said Carsten Fristch and the commodities analysts at Commerzbank in their 2019 outlook. “Only palladium is unlikely to climb any further next year,” they added.