Gold bounces back as dollar slips

Metals and Minerals,Metal Exchange,U.S. Stocks,Markets,Gold,Silver,Copper

Gold futures inched higher while the dollar slipped in Monday trading as financial markets looked to potentially key developments this week on tax changes and interest-rate policy.

Gold failed to gain much ground last week even as the dollar struggled. The two assets unhinged from their typically inverse relationship last week as the dollar extended its slump in the wake of Federal Reserve signals for a cautious approach to interest-rate tightening next year. The dollar hit a two-month against the euro, for instance, but gold still fell.

By Monday, however, December gold GCZ7, +0.61% was up $6.90, or 0.5%, to $1,294.20 an ounce. After an up-and-down week, gold logged a roughly 0.7% weekly decline last week, its first weekly fall of the past three. The exchange-traded SPDR Gold Trust GLD, +0.55%   gained 0.5% premarket.

The ICE U.S. Dollar Index DXY, -0.25%  was off 0.2% at 92.64. It shed 1% last week to push its loss for 2017 to more than 9%. Gold and the dollar typically trade inversely as moves in the U.S. unit can influence the attractiveness of commodities to holders of other currencies.

Market participants are likely to be watching the first Senate vote on U.S. tax reform with interest this week. On the Federal Reserve front, Fed Chair-designate Jerome Powell goes before a Senate panel considering his confirmation on Tuesday. On Wednesday, outgoing Fed Chair Janet Yellen will then be talking about the economic outlook in front of the Joint Economic Committee.

“It is unclear to what extent [these events] will allow any new conclusions to be drawn about the U.S. Fed’s interest-rate policy,” said Carsten Fritsch, commodities analyst with Commerzbank, in a note. Financial markets widely expect a rate hike in December but are doubtful the central bank will follow up with all three Fed-forecasted rate hikes in 2018.

“Growing doubts about the inflation outlook in the U.S. have been pressuring the dollar. The price data due to be published this week are also likely to show that the inflation measure preferred by the Federal Reserve [the core personal consumption expenditure index] still fell short of the Fed’s target in October,” said Fritsch.

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding nonyielding bullion.

December silver SIZ7, +0.64% rose 11 cents, or 0.7%, to $17.1100 an ounce. For last week, the metal declined about 2.2%, representing its first weekly drop in the last three. The exchange-traded iShares Silver Trust SLV, +0.50%  rose 0.4% premarket.

Elsewhere on Comex, December copper HGZ7, -1.09% fell 4 cents, or 1.2%, to $3.1325 a pound, while January platinum PLF8, +0.50%  rose $3.20, or 0.3%, to $948.50 an ounce. December palladium PAZ7, -0.04%  declined 35 cents, or 0.04%, to $993.35 an ounce.