BULLION LATEST 19/10: Gold dips on firmer dollar, high possibility of US rate increase

The spot gold price was weaker during Asian morning trading on Thursday October 19, as a firmer dollar and the increasing likelihood that the US Federal Reserve (Fed) would raise interest rates in December weighed on investors’ appetite for the metal.

The spot gold price was quoted at $1,277.60-1,277.90 per oz as of 04:14 BST, down $2.30 on the previous close. Trade has ranged from $1,276.90-1,282.03 so far today.

  • A firmer dollar has put pressure on the yellow metal.
  • The dollar index was down 0.01% at 93.41 as of 04:14 BST, this after its recent dip to 92.75 on October 13.
  • High expectations that the Fed will raise US interest rates in December also continue to weigh on gold prices.
  • New York Fed President Bill Dudley said the Fed is ‘on path’ to achieve its 2017 rate forecast and achieve three rate increases in 2018.
  • Nearly 92% of market participants expect that the Fed will raise rates to between 1.25% and 1.5% in December, according to CME Group’s FedWatch tool.
  • Furthermore, with investor cash moving back to equities, gold prices were on the defensive, according to Sucden Financial Research.
  • US equities were higher with major bourses hitting intra-day records.
  • Overnight, Dow Jones closed at 23,157.6, up 160.16 points; the S&P 500 rose 1.9 points to 2,561.26; while the Nasdaq moved up 0.01% to 6,624.22.
  • “With US yields continuing to creep slowly higher and stocks markets riding exuberantly high it will most likely take some sort of geopolitical event to break the yellow metal out of its bearish malaise,” Jeffrey Halley, senior market analyst at Oanda, said.

Silver, PGMs

  • In the other precious metals, the spot silver price was down $0.025 to $16,930-16.950 per oz. Platinum was flat at $916-921 per oz and palladium gained $4 to $959-964 per oz.
  • On the Shanghai Futures Exchange, gold for December delivery was recently at 275.6 yuan ($41.61) per gram, and the December silver was at 3,886 yuan per kg.

Currency moves and data releases

  • The dollar index was down 0.01% at 93.41 as of 04:14 BST.
  • In other commodities, the Brent crude oil spot price dipped 0.11% to $58.12 per barrel while the Texas light sweet crude oil spot price was down 0.06% to $52.02
  • In US data on Wednesday, building permits and housing starts in September both disappointed at 1.22 million and 1.13 million, respectively.
  • In data on Thursday, China reported third-quarter gross domestic product (GDP) growth of 6.8% year on year, on par with the forecast reading but below the previous print of 6.9%. There had been expectations in the market that the world’s largest base metals consumer would see growth of around 7% from a year earlier.
  • Chinese industrial production surprised to the upside with an increase of 6.6% against an expected reading of 6.4% and a previous reading of 6.0%.
  • China’s fixed asset investment missed with a reading of 7.5% – 7.7% had been expected. This was also lower the previous print of 7.8%.
  • Staying with China, Chinese President Xi Jinping gave his opening speech at the 19th Communist Party Congress on October 18, saying China was working toward “socialist modernisation” and that “It is time for [China] to take centre stage in the world and to make a greater contribution to humankind.”
  • Data out later today includes UK retail sales, US unemployment claims, Philly Fed manufacturing index, CB leading index and natural gas storage.