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Gold hovers near two-month lows as dollar firms

Reuters  |  NEW YORK/LONDON 

By Renita D. Young and Zandi Shabalala

NEW YORK/(Reuters) - Gold dipped slightly and held near a two-month low on Wednesday, under pressure from a firmer ahead of a vote on the U.S. reform plan, but a potential shutdown lent support to prices.

Spot gold was down 0.1 percent at $1,264.57 an ounce by 1:41 p.m. EST (1841 GMT). A day earlier, it hit its weakest since Oct. 6.

U.S. gold futures for February delivery edged higher to settle up $1.20, or 0.1 percent, at $1,266.10 per ounce.

The dollar hit a two-week high against a basket of currencies on optimism about progress on U.S. legislation.

A stronger greenback makes dollar-priced assets like gold more expensive for holders of other currencies.

The U.S. Senate will vote on Wednesday on whether to send its legislation to a conference to hammer out differences with the U.S. House of Representatives' version of the plan.

Gold was pressured by the view, reinforced by a poll of economists, that the U.S. Federal Reserve is almost certain to raise interest rates next week.

The price of gold had not fully reflected expectations of a U.S. rate rise next week and in 2018 and therefore, gold could ease further in the short term, said Dominic Schnider at UBS Wealth Management in Hong Kong.

Gold is highly sensitive to rising U.S. rates, as these lift the opportunity cost of holding non-yielding bullion while boosting the dollar.

A possible U.S. shutdown "should be positive for gold but that could be temporary because no one really expects the U.S. to default," said Capital Economics commodities economist Simona Gambarini.

Meanwhile, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, fell on Tuesday.

But November holdings of gold-backed ETFs showed they rose by 9.1 tonnes to 2,357 tonnes, with net inflows coming entirely from Europe as the dollar fell, the World Gold Council said.

Among other metals, silver fell 0.8 percent at $15.97 an ounce, after hitting $15.88, its lowest since mid-July.

Silver broke below $16.00 for the first time in 4-1/2 months on follow-through selling from the previous session, said John Lawrence, senior metals trader for Heraeus Metals in New York.

"Silver may test lower. More selling may come into the market as silver follows gold and follows the industrial complex lower."

Platinum eased 1.7 percent at $900.05 an ounce after touching its lowest since July 11 at $895. Palladium rose 1.2 percent at $994.40 an ounce.

(Additional reporting by Apeksha Nair in Bengaluru; editing by David Evans and David Gregorio)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, December 07 2017. 10:12 IST
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