Rough September dents gold’s 3rd quarter gain
Gold settled lower Friday, posting losses for the week and month in reaction to a stronger dollar, but still notched a gain for the third quarter.
Traders weighed the likelihood of success for Republican tax-cut proposals as well as expectations for another rate increase by the Federal Reserve before year-end.
Gold for December delivery on Comex GCZ7, -0.48% fell $3.90, or 0.3%, for the session to settle at $1,284.80 an ounce. Prices, based on the most-active contracts, were down roughly 1% for the week and lost 2.7% for the month, according to FactSet data. For the quarter, however, prices were up around 3.6%.
December silver SIZ7, -0.93% shed 17.1 cents, or 1%, to $16.676 an ounce—for losses of about 1.8% for the week and 4.8% for the month. The metal logged a roughly 1% rise for the quarter.
“A more hawkish shift in Fed policy expectations, good economic data, and optimism about tax reform are supporting the reflation argument, which is bad for gold prices in the months ahead,” said Tyler Richey, co-editor of the Sevens Report.
“But if any catalyst, be it geopolitical (think North Korea) or otherwise, changes the outlook for any of those three bearish influences, gold could rebound back toward the mid-$1,300s in a hurry,” he told MarketWatch.
For now, the U.S. dollar and Treasury yields were expected to continue calling the tune for gold. Yields have risen significantly this week as Treasurys sold off, allowing the dollar to gain ground versus major rivals. A stronger dollar can weigh on commodities priced in the currency as it makes them more expensive in other currencies. The ICE Dollar Index DXY, -0.06% a measure of the U.S. unit against a basket of six major rivals, was up less than 0.1% Friday, on track for a 1% weekly rise.
Still, gold may have more room to bounce.
While a stronger dollar has pressured gold, holdings of large gold exchange-traded funds have increased, said Naeem Aslam, chief market analyst at ThinkMarkets UK, in a note. The SPDR Gold Shares ETF GLD, -0.52% was off 1% for the week, but has rallied 3.4% for the quarter.
“It clearly shows that smart money is actually busy in hedging their risk while the gold price drops. The 30-day volatility index for the gold price has also surged and this provides an evidence that the shining metal could bounce soon,” Aslam said.
On the data front, consumer spending rose 0.1% in August, matching expectations. However, If adjusted for inflation, spending fell for the first time since January. Personal income climbed to an above-forecast 0.2%, and the PCE index, the Fed’s preferred inflation gauge, increased 0.1% in August.
In other metals trade, January platinum PLF8, -1.22% dropped $10.20, or 1.1%, to $915.50 an ounce, with prices for the most-active contracts ending down 0.8% for the quarter.
But December palladium PAZ7, +0.77% rose $9, or 1%, to $936.85 an ounce, putting it up nearly 12% for the quarter. December copper HGZ7, -1.12% fell 2.6 cents, or 0.9%, to $2.955 a pound, but scored a quarterly gain of over 9%.