Gold little changed as Fed policy rate expectations offset geopolitical risk
NEW YORK/LONDON — Gold prices ended little changed on Monday as expectations that the Federal Reserve will press ahead with interest rate rises offset concerns over political tensions in North Korea and the Middle East.
Late in the session, prices were supported after Fed Chair Janet Yellen struck a cautious note, saying it would be appropriate to gradually raise rates if the economy continued to perform strongly.
Spot gold was up 0.04% at $1,254.06 an ounce by 4:32 p.m. EDT (2032 GMT), while US gold futures for June delivery settled 0.30% lower at $1,253.90.
On Friday, the metal rose above $1,270 on Friday for the first time since early November following much weaker-than-expected US jobs data, and after the United States launched a missile strike on a Syrian air base.
Top aides to US President Donald J. Trump differed on Sunday on where US policy on Syria was headed after last week’s attack on a Syrian air base, while US Secretary of State Rex Tillerson warned that the strikes were a warning to other nations, including North Korea.
STILL THE PREMIER FACTOR
“Given light market positioning there is scope for safe haven flows; however, complacency suggests prices are more likely to rangetrade in the near term,” Standard Chartered said in a note.
“Gold is caught between rising tensions that could stoke safe haven flows, and the market looking through the geopolitical risks to the next US rate hike given the tight correlations.”
After rallying for a fourth month though gold is trading just above its 200 day moving average.
“There appears to have been some profit taking after that move above the 200-day moving average on Friday,” Mitsubishi analyst Jonathan Butler said.
“Friday’s US unemployment reading, which fell to a 10-year low, would appear to confirm that the United States is approaching full employment,” he added.
“This has increased the probability of a June rate rise… (and) clearly weighed on gold.”
The US dollar fell on Monday as Treasury Yields dipped after starting the week near three-week highs against major currencies in the wake of a Federal Reserve official reinforcing the US central bank’s commitment to continue raising interest rates.
By the afternoon in New York, US Treasury yields pared an earlier drop, prompted by soft demand at a $24-billion auction of three-year notes, the first part of this week’s $56-billion couponbearing government debt supply.
Expectations that the pace of US interest rate increases will pick up this year, lifting the opportunity cost of holding nonyielding bullion, have proved a major drag on gold.
Among other precious metals, silver was down 0.20% at $17.93 an ounce, having hit its highest since Feb. 27 at $18.47 on Friday; platinum was 1.20% lower at $939.90; while palladium was down 1.60% at $788.20. —