Gold futures settled lower on Thursday for a third session in a row as investors looked to recent economic data and a busy calendar of speeches by Federal Reserve officials for cues on the path for U.S. interest rates.
Price action
-
Gold for December delivery
GC00,
+0.25% GCZ23,+0.25% fell $1.70, or about 0.1%, to settle at $1,942.50 an ounce on Comex. Prices for the most-active contract settled at the lowest since Aug. 25, FactSet data show. -
December silver
SIZ23,
+0.30% declined 26 cents, or 1.1%, to $23.24 an ounce. -
December copper
HGZ23,
-0.76% fell by 0.6% to $3.76 a pound. -
Platinum for October delivery
PLV23,
-0.38% settled at $909.60 an ounce, down 0.6%, while December palladium PAZ23,+0.12% added 0.4% to $1,215 an ounce.
Market drivers
“Gold prices remained under pressure and could continue to see a decline as traders take U.S. economic data into account, as well as the changing expectations around U.S. monetary policy,” said Bas Kooijman, chief executive officer at DHF Capital, in emailed commentary.
Gold futures settled Thursday at their lowest since Aug. 25. Prices had also fallen Wednesday after strong U.S. economic data reinforced expectations that the Federal Reserve will keep interest rates elevated for some time and helped lift Treasury yields and the U.S. dollar.
“Both higher U.S. dollar and interest rates are bearish for gold since it makes the bullion more expensive for foreign investors while eroding its appeal as a non-interest-generating asset,” strategists at Société Générale wrote in a Thursday note.
Treasury yields BX:TMUBMUSD10Y ticked lower in Thursday dealings, while the dollar DXY remained firm against major currencies.
Data on Thursday showed some strength in the U.S. economy, with initial jobless-benefit claims down 13,000 to 216,000 in the week ending Sept. 2. That’s the lowest level since February.
Still, the Federal Reserve’s latest survey of economic conditions, known as the Beige Book, released Wednesday afternoon revealed that the U.S. economy grew at a modest pace in July and August.
The next big event for gold and the dollar is the U.S. CPI data next week, which “could influence the Fed’s decision whether to hike [rates] further or not,” said Fawad Razaqzada, market analyst at City Index and FOREX.com.
Thanks to the resilience of U.S. economy, the market is expecting interest rates to remain at current levels longer than previously expected, he said. “This is what has helped to keep the dollar underpinned and gold undermined.”
Several regional Federal Reserve policy makers were slated to deliver remarks Thursday. Those will be parsed by traders for potential indications of the central bank’s plan for interest rates.
For now, the $1,900 level for gold is “still holding strong,” Stephen Innes, managing partner at SPI Asset Management, told MarketWatch in a recent email interview. That’s “likely due to gold’s role as an inflation hedge, especially considering the significant increase in oil prices since the beginning of the year.”
Market sentiment also suggests that the Fed’s policy rate has already peaked, so these factors combined “continue to support the demand for gold as a reliable safeguard against rising inflation,” he said.
Read: Investor allocation to gold is at its highest level in 11 years, JPMorgan strategist says
Still, “this may not constitute a wholesale revision in how speculators view gold as a negative beta to [the dollar],” said Innes. “So, with U.S. yields and the dollar up, speculators will still sell gold on rallies.”
Also see: Why platinum is forecast to see its largest-ever annual supply deficit
