Metals Stocks: Gold prices stabilize as dollar weakens ahead of midterm vote

Gold prices stabilized Monday, trading little changed in either direction as traders eye some weakness in the U.S. dollar a day ahead of closely watched midterm congressional elections.

“Stepping back from today’s price action, what is most interesting for gold is how well it has held its ground despite a significant rally in the U.S. Dollar Index in recent weeks,” Michael Armbruster, managing partner at Altavest, told MarketWatch. “When it comes to gold, its easy to be lulled into a sense of complacency when the U.S. dollar is trending higher along with interest rates.”

Gold for December delivery

GCZ8, -0.18%

 edged down by 40 cents to trade at $1,232.90 an ounce, holding ground between a high of $1,236.60 and a low of $1,228.40.

The contract ended Friday and last week slightly lower after a report showed an even stronger-than-expected U.S. job market performance in October than expected—data seen keeping the next Federal Reserve interest-rate hike likely on track for December. Higher rates dull the appeal of nonyielding bullion, while boosting the dollar, making dollar-priced commodities less attractive to investors using other currencies.

Still, data Monday showed that the nonmanufacturing index compiled by the Institute for Supply Management slipped to 60.3 last month from a 21-year high of 61.6 in September.

The dollar continued its decline after the ISM services survey, with the ICE U.S. Dollar index

DXY, +0.05%

was down 0.2% at 96.378 Monday. Last Thursday, gold settled at a more than three-month high when the index weakened, and as stock markets wrapped up a dismal October.

“Increased risk aversion with the equity markets selloff has certainly added a risk-averse boost to gold in recent weeks, but if the dollar starts to lose traction due to the reversal of the U.S.-China trade dispute then this could be a driver of continued gold strength,” said Richard Perry, analyst at Hantec Markets.

Perry is watching $1,236 as a technical “line in the sand” for gold and says a consistently higher market at that price opens the way to a climb toward $1,266.

Armbruster pointed out that “investors should keep in mind that central banks around the world (China, Russia and others) are reportedly adding to their gold holdings. Such behavior by central banks may trump headwinds from the dollar and interest rates and result in a surprise rally.”

Central bank gold reserves grew by 22% year-over-year in the third quarter, according to a recent report from the World Gold Council.

Elsewhere in metals trading, December silver

SIZ8, -0.99%

fell 9.1 cents, or 0.6%, at $14.665 an ounce. It scored a 0.4% rise for last week. January platinum

PLF9, -0.62%

 fell 0.2% to $874.10 an ounce after a 5% march higher last week. December palladium

PAZ8, +1.13%

 gained 0.9% to $1,114.70 an ounce, after tacking on roughly 1.7% for its weekly performance.

December copper

HGZ8, -2.03%

 fell 1.8% to $2.758 a pound after ending last week up 2.4%.

Read: Copper weakens as hopes for trade deal fade

Among exchange-traded funds, the SPDR Gold Shares

GLD, -0.27%

 shed 0.1% in Thursday dealings. The iShares Silver Trust

SLV, -0.83%

 lost 0.5%.

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