Moneycontrol
Nov 06, 2017 07:29 PM IST | Source: Reuters

Gold creeps back above $1,270/oz as dollar steadies, yields slip

Gold is highly sensitive to rising U.S. rates, as these increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

Gold edged back above USD 1,270 an ounce on Monday as a steadier tone to the dollar and a drop in bond yields tempted some buyers back to the metal after its third straight weekly decline.

Prices remained under pressure from expectations that the Federal Reserve is on track to lift U.S. interest rates for a third time this year next month.

Spot gold was up 0.1 percent at USD 1,271.32 an ounce at 1030 GMT, while U.S. gold futures for December delivery were up USD 2.60 an ounce at USD 1,271,80.

The dollar steadied on Monday after its biggest weekly rise this year, while Germany's benchmark bond yield hit a near two-month low as investors awaited clues on the European Central Bank's asset purchase plans. U.S. 10-year yields also hit their weakest in two weeks.

Gold was therefore set for another uneventful day despite surrounding event risk linked to U.S. President Donald Trump's visit to Asia, Saxo Bank's head of commodity research Ole Hansen said.

"Gold remains stuck in a USD 1,263 to USD 1,282 range, with lower bond yields being offset by a stronger dollar," he said.

"With Trump in Asia we could see North Korea talk heat up at any point," he added. "The Japanese yen was particularly weak overnight before consolidating and that is probably the key right now given the supportive turnaround seen in bonds during the past week."

Gold has drifted lower over recent weeks, pulling back 2.5 percent from its mid-October peak as expectations for a Fed interest rate increase were shored up by upbeat U.S. data.

Gold is highly sensitive to rising U.S. rates, as these increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, declined by just over five tonnes last week, data from the fund showed, after a 0.3-tonne outflow on Friday.

Hedge funds and money managers reduced their net long position in COMEX gold contracts for the seventh straight week, in the week to Oct. 31, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday.

"Speculative financial investors are still withdrawing from gold," Commerzbank said on Monday. "Net long positions decreased by a further 2,400 to 166,000 contracts in the week to Oct. 31."

Among other precious metals, silver was 0.5 percent higher at USD 16.88 an ounce, platinum was up 0.5 percent at USD 922.80, and palladium was up 0.5 percent at USD 1,001.60.

 
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