Gold prices rose in Thursday’s trading session, in an attempt to reach a third straight daily gain. The latest rise comes after the release of US economic data on jobs and inflation supported a moderate US interest rate hike, a long-priced course of action in the gold market.
The dollar’s appreciation has slightly reduced the price of gold and the interest in riskier investment alternatives. The steady rise to new record highs in US stock markets dulled some short term interest in the precious metal.
Regarding US economic data, the PPI was flat, but the core PPI rose 0.3% for the second straight month. Other reports also showed a drop in unemployment claims. With all of these positive reports, the Federal Reserve is expected to raise interest rates twice this year and three times next year. The next meeting of monetary policy of the Federal Reserve will be held in September.
December gold rose $1.70 or 0.2%, to trade at $1,222. The precious metal is trading within a narrow range and hovering around its lows this year, dropping 0.9% in August so far and 8.2% a year to date.
September silver fell 5 cents or 0.3 percent to $15.48 an ounce. The white metal is still down about 11% so far in 2018, losing 4% last month alone.
Since there has been no significant change in interest rate differentials and amid the absence of geopolitical tensions, gold is expected to test the market at a minimum of $1,200. The dollar index rose 0.1% to 95.22 points, while the 10-year US Treasury yield remained close to 2.96%.
A stronger dollar makes dollar-denominated metal purchases less attractive to buyers using other currencies, and thus can increase the opportunity costs of owning gold bullion that does not provide returns and the costs of storing and securing them.
Trade tensions, although doing little to strengthen the role of routine gold as a safe haven, play out against the short-term negative interest rate for the gold market, which is positive for the dollar. Analysts are watching for signals that tariffs could hurt growth for economic engines such as the United States and China, perhaps even affecting the Federal Reserve’s decision.
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