Gold Closes Slightly Higher With Dollar Falling
February 22 2018 - 3:04PM
Dow Jones News
By Amrith Ramkumar and David Hodari
Gold prices swung between small gains and losses before closing
slightly higher Thursday, with investors still digesting minutes
from the Federal Reserve's January meeting.
Front-month gold for February delivery settled up less than 0.1%
to $1,330.60 a troy ounce on the Comex division of the New York
Mercantile Exchange. Prices have fallen 2.3% from their highest
level since August 2016 recently with the dollar rebounding from
multiyear lows and bond yields rising.
A stronger dollar makes gold and other dollar-denominated
commodities more expensive for overseas buyers. Some analysts have
also said the recent surge in bond yields reflects investors' bets
that higher inflation will give the Federal Reserve a freer hand to
raise interest rates more aggressively moving forward.
However, on Thursday, the dollar falling helped gold bounce off
its lows for the day, with the WSJ Dollar Index, which tracks the
U.S. currency against a basket of 16 others, down 0.4%. Some
investors think the dollar will plumb fresh multiyear lows moving
forward, boosting commodity prices.
Minutes released Wednesday showed that several Fed officials
late last month believed the economy was set to grow even faster
than when they elevated their growth projections at their December
meeting.
Some officials also appeared more certain inflation would return
to their 2% target over the coming year after years of consistently
lagging behind.
The combination of gradually higher inflation and higher rates
could pose trouble for gold, which struggles to compete with
yield-bearing assets like Treasurys when rates rise but is also
used by many investors to hedge against an unexpected rise in
inflation.
"If we get 2% inflation, I don't think that's going to be enough
to cause the gold market to rally," said Jim Wyckoff, senior
analyst at Kitco Metals. "I think it's going to take some kind of
hotter inflation report that comes up that maybe suggests 3 or
4%."
The minutes showed some Fed officials were still concerned that
inflation will continue to lag behind their target, a trend that
could lead them to stay accommodative with monetary policy,
according to some analysts.
The dollar falling helped gold bounce off its lows for the day,
with the WSJ Dollar Index, which tracks the U.S. currency against a
basket of 16 others, down 0.4%. Some investors think the dollar
will plumb fresh multiyear lows moving forward, boosting commodity
prices.
Among base metals, front-month copper for February delivery
added 0.8% to $3.2375 a pound. The industrial metal is 1.5% off its
roughly four-year highs from late December, but some analysts think
favorable demand from China, the world's largest consumer, will
continue to support prices.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and David
Hodari at David.Hodari@dowjones.com
(END) Dow Jones Newswires
February 22, 2018 14:49 ET (19:49 GMT)
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