Metals Stocks: Gold settles higher to halt 4-session skid, climbs further after Fed decision
Gold settled higher Wednesday, recouping part of the losses suffered over the last four sessions that sent prices to a nearly six-month low.
Gold prices then climbed above the settlement level as the dollar continued to weaken in the wake of the U.S. Federal Reserve’s decision to raise interest rates, as expected, for the third time in 2017. The central bank lifted a key short-term U.S. interest rate to a range of 1.25% to 1.5% and stuck to its earlier forecast for just three rate hikes in 2018.
The Fed policy statement “has once again straddled the line between the doves and hawks — noting how inflation has remained persistently and confoundingly low, but that economic growth remains sufficient for the central bank to plan for more rate increases in 2018,” said Brien Lundin, editor of Gold Newsletter.
“Not surprisingly, gold’s reaction has been positive … and that’s precisely what I expect, as the record of the last two years shows that year-end rate hikes have served as launching pads for big rallies in gold,” he said. “The Fed’s plans for rate normalization have been side-tracked by economic reality in the new year. However, also judging from the past two years, it could take a couple of days or a couple of weeks for gold to begin rebounding more strongly.”
In electronic trading shortly after the decision, which came after gold futures settled, February gold GCG8, +1.11% was at $ 1,255 an ounce. It had finished the session at $ 1,248.60, up $ 6.90, or 0.6%. On Tuesday, it ended at $ 1,241.70, for the lowest finish since mid-July, according to FactSet data. Futures are trading up nearly 9% so far this year, propped up in large part by geopolitical uncertainty.
Among exchange-traded funds, the SPDR Gold Trust GLD, +0.74% added 0.3%, while the VanEck Vectors Gold Miners ETF GDX, +3.27% rose 2.1%.
The precious metals market had been defensive ahead of the Fed announcement. Consumer-level price data, released early Wednesday, showed a November bump. Lagging inflation has challenged the Fed’s aim to reverse easy-money monetary policy. Higher rates make nonyielding bullion less attractive than yield-bearing assets.
Jeff Wright, chief investment officer at Wolfpack Capital, said earlier Wednesday that gold found support following the CPI data.
“With inflation kept at arms length, this will extend the timeline for another interest rate increase most likely into Q2 2018,” he said.
Gold gained as the leading dollar index DXY, -0.45% which gauges the buck’s strength against a half-dozen rivals, fell by 0.5%. However, the Dow Jones Industrial Average DJIA, +0.58% and the S&P 500 index SPX, +0.24% looked to continue their winning streaks. Gold typically moves inversely to the dollar and stocks, as risk-on sentiment tends to lure investors away from haven gold.
Among other metals, March silver SIH8, +2.44% gained 1.3% to settle at $ 15.869 an ounce before the Fed news. The iShares Silver Trust SLV, +1.99% rose 0.8%.
March copper HGH8, +1.14% ended at $ 3.054 a pound, up 1%. January platinum PLF8, +0.83% fell 30 cents to $ 875.40 an ounce. March palladium PAH8, +0.47% added 0.2% to $ 1,004.05 an ounce.
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