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Gold Gains on Global Stock Market Jitters, Capped by Stronger Greenback

October 9, 2018 at 15:44 by Andrew Moran

Gold futures are posting slight gains on Tuesday as global stock markets are getting battered. Investors, who are ostensibly making a safe-haven play with the yellow metal, are helping lift prices as the precious metal has been situated below the $1,200 threshold for more than a week.

December gold futures rose $2.60, or 0.22%, to $1,191.40 per ounce at 15:18 GMT on Tuesday. The yellow metal, which etched out a weekly gain last week, has been in negative territory on the year since April, down 10.3% year-to-date.

The sister commodity to gold is looking to post a rally as December silver futures tacked on $0.05, or 0.35%, to $14.38 per ounce. Last week, silver was flat and has plunged 15% so far this year.

Traders poured into the traditional safe-haven asset on Tuesday after Asian markets plummeted over growing concerns of a steep slowdown in China’s economic growth. Asian shares reached 17-month lows and domestic shares tumbled sharply. The world’s second-largest economy has stalled in recent months, stemming from the trade conflict with Washington, leading the government and central bank to employ a series of stimulus measures.

Plus, matters were not helped when the International Monetary Fund (IMF) slashed its global economic forecast for 2018 and 2019, blaming sluggish growth on the international trade dispute.

Gold prices edged up on the losses and bearish predictions, but they were capped by a stronger US dollar as the greenback jumped 0.13% to 95.88. A strengthening buck, advancing about 3% in 2018, is bad for dollar-pegged commodities because it makes it more expensive for foreign investors to purchase.

The market is beginning to pencil in one more rate hike this year by the Federal Reserve. According to the CME Group FedWatch tool, there is an 83% chance of the US central bank raising interest rates in December by at least a quarter-point. Gold is generally sensitive to a rising-rate environment because it lifts the opportunity cost and sends investors into yield-bearing assets.

In other metal markets, December copper futures climbed $0.015, or 0.55%, to $2.78 a pound. December platinum futures surged $8.90, or 1.09%, to $827.20 per ounce. December palladium futures slipped $3.80, or 0.36%, to $1,065.10 an ounce.

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