Gold and silver futures marched lower Wednesday as the dollar found traction on rate-hike expectations and U.S. stock future gained on the back of mostly upbeat earnings results.
‘Haven’ gold tends to move opposite the dollar and riskier stocks, but while gold has been choppy in recent sessions as stock indexes(^GSPC) test records, the yellow metal remains underpinned by global growth uncertainty.
Early Wednesday, August gold (XCEC:GCQ6) fell $14, or 1%, to $1,318.40 an ounce, after marking its highest settlement in a week on Wednesday.
Meanwhile September silver (XCEC:SIU6) tumbled 45 cents, or 2.2%, to $19.57 an ounce. Silver prices, which are supported by hedging and industrial-use demand, are still up about 5.1% month to date, outpacing gold’s 0.2% decline for the month so far.
Silver futures held near $20 an ounce on Tuesday as softer U.S. stocks helped support demand for relatively lower-risk precious metals.
The ICE U.S. Dollar index (IFUS:DX-Y.NYB) most recently was edging modestly higher at 97.13, up less than 0.1%.
“The economic data in the U.S. is supporting the argument that another rate hike could be a possibility by the end of this year and this is fueling the dollar rally,” said Naeem Aslam, chief market analyst with Think Forex UK Ltd.
Federal Reserve officials are looking more confidently toward an interest-rate increase before year-end, possibly as early as September, The Wall Street Journal reported Tuesday. Stabilization of the global markets following Britain’s surprise decision to leave the European Union and a more buoyant economy have been cited as reasons for the central bank’s optimism on a rate hike.
Higher interest rates lift demand for the dollar, which can undermine dollar-priced gold’s appeal to would-be foreign buyers. Moreover, prospects for higher rates can turn off investors toward precious metals, which don’t offer a yield, in favor of higher yields elsewhere.
Among the exchange-traded funds, the SPDR Gold Trust (GLD) fell 1%, while the VanEck Vectors Gold Miners ETF (GDX) dropped 1.5%.
Precious-metals miner stocks were active in London trading after production announcements.
Meanwhile, September copper (XCEC:HGU6) fell 3 cents, or 1.4%, to $2.23 a pound. October platinum (XNYM:PLV6) fell $19.70, or 1.8%, to $1,078.90 an ounce. September palladium (XNYM:PAU6) dropped $6.90, or 1.1%, to $649.50 an ounce.
By: Rachel Koning (Market Watch).
Photo: The Wall Street Journal.
Review: Emerging Market Formulations & Research Unit, FLAGSHIP RECORDS.
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