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Gold Futures Post Modest Gains as Investors Pour into Safe-Haven Asset

November 13, 2017 at 17:42 by Andrew Moran

Gold prices are trading higher on the first day of the trading week. The yellow metal is benefiting from investors retreating from equities, even as the US dollar moves higher and the US central bank gets ready to pull the trigger on a rate hike next month.

December gold futures rose $4.20, or 0.33%, to $1,278.40 per ounce at 16:27 GMT on Monday. This comes as the precious metal suffered its largest one-day drop in a month on Friday when gold prices suddenly plunged 1% in 15 minutes. The yellow metal was still able to pull out a weekly gain of 1.2%.

Silver, the sister commodity to gold, is also rallying to kick off the trading week. December silver futures climbed $0.15, or 0.94%, to $17.03 an ounce. The white metal recorded a 1.4% weekly advance last week.

On Monday, traders shifted into precious metals, metal stocks, and ETFs, and away from global stocks. The market has been concerned about President Donald Trump’s tax reform plan, which has somewhat stalled in the Senate after gaining a lot of momentum in the House.

This was a boon for gold because the US dollar jumped 0.13%, reversing last week’s performance, which stemmed from the US Senate’s tax cut proposal. A stronger greenback is bad for dollar-denominated commodities like gold and silver because it makes it more expensive for foreign investors to purchase.

Analysts say that gold will primarily be tracking the US dollar and Treasury yields over the coming weeks. The Federal Reserve is widely expected to raise interest rates at next month’s Federal Open Market Committee (FOMC) meeting, achieving the central bank’s goal of three rate hikes in 2017. Gold is generally sensitive to a rising-rate environment because it lifts the opportunity cost and sends investors into yield-bearing assets.

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