Gold dipped slightly and held near a two-month low on Wednesday, under pressure from a firmer US dollar ahead of a vote on the US tax reform plan, but a potential government shutdown lent support to prices. Spot gold was down 0.1 percent at $1,264.57 an ounce by 1:41 pm EST (1841 GMT). A day earlier, it hit its weakest since October 6.
US 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 US tax legislation. A stronger greenback makes dollar-priced assets like gold more expensive for holders of other currencies.
The US Senate will vote on Wednesday on whether to send its tax legislation to a conference to hammer out differences with the US House of Representatives' version of the plan. Gold was pressured by the view, reinforced by a Reuters poll of economists, that the US Federal Reserve is almost certain to raise interest rates next week.
The price of gold had not fully reflected expectations of a US 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 US rates, as these lift the opportunity cost of holding non-yielding bullion while boosting the dollar.
A possible US government shutdown "should be positive for gold but that could be temporary because no one really expects the US 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 global 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 precious 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 Precious Metals in New York. 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.
Comments
Comments are closed for this article.