Metals: Gold Slips to Four-Month Low With Dollar Rising, Interest Rates in Focus
By Amrith Ramkumar and David Hodari
Gold prices fell to their lowest level since late July on Thursday, weighed down by a stronger dollar and investor concerns about higher interest rates.
Gold for February delivery declined 0.8% to $1,256.10 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices had stayed between roughly $1,265 and $1,300 for much of the past month, but analysts have said headwinds for the precious metal are coming into focus ahead of the Federal Reserve's meeting next week.
Gold struggles to compete with yield-bearing assets like Treasurys as borrowing costs rise. The Fed is widely expected to raise rates for a third time this year next week, and most economists expect multiple rate increases again next year. The interest-rate outlook has been one of the main factors that has pulled gold nearly 7% off its year-to-date highs from early September.
The dollar rebounding from multiyear lows has also been bearish for gold because gold and other dollar-denominated commodities become more expensive for overseas buyers when the U.S. currency grows stronger. The WSJ Dollar Index, which tracks the dollar against a basket of 16 other currencies, rose 0.2% Thursday.
Analysts have said they expect gold prices to fall ahead of next week's Fed meeting, then rebound afterward, a pattern they have seen when the central bank had raised rates previously.
"I'm absolutely not surprised we're seeing a little bit of weakness," said George Milling-Stanley, head of gold strategy at State Street Global Advisors. "This is a very well established pattern," he said.
Investors will be keeping an eye on clues about the Fed's outlook for 2018 and economic data moving forward, as doubts about the Fed's interest-rate plans have supported gold at various points this year. The latest jobs report is scheduled to be released Friday.
Some analysts have said unexpected geopolitical tensions could also boost prices because many investors favor gold and other haven assets when they think markets might turn rocky.
Among base metals, copper for March delivery rose 0.3% to $2.9690 a pound. The industrial metal had its worst day in almost three years Tuesday, falling back below $3 and more than 7% off its three-year highs from October. Concerns that demand from China, the world's largest consumer, will slow moving forward have led investors to take profits after the run-up in prices this year, analysts have said.