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Gold Holds Steady on Fed Speech Fallout, US-Mexico Deal

August 27, 2018 at 17:28 by Andrew Moran

Gold futures are holding steady to kick off the trading week. Gold prices, which have been having an abysmal 2018, might be trying to find a direction on Monday in the fallout of the Jackson Hole retreat, a new US-Mexico trade deal, and a weaker greenback.

December gold futures tacked on $3.60, or 0.30%, to $1,216.90 per ounce at 17:00 GMT on Monday. The yellow metal, recording a 1.5% gain last week, has firmed well above the key $1,200 mark after falling under the threshold for a brief period. But it is still down 8.4% in 2018.

The sister commodity to gold is still attempting to climb back above the important $15 threshold. December silver futures rose $0.05, or 0.34%, to $14.95 an ounce. The white metal also reported a weekly jump of about 0.5% last week, helping lower its year-to-date losses to under 14%.

On Friday, Federal Reserve Chair Jerome Powell delivered a bullish speech during the annual central bank retreat in Jackson Hole, Wyoming, where he reaffirmed that the national economy can handle the normalization of interest rates and monetary policy. He did not, however, respond to President Donald Trump’s negative criticisms of the central bank raising rates five times since he moved into the Oval Office.

rising-rate environment is typically bad for commodities because it lifts the opportunity cost and sends investors into yield-bearing assets.

Following months of intense trade negotiations, the White House confirmed that the US and Mexico have struck a new bilateral trade pact that replaces the North American Free Trade Agreement (NAFTA). Officials say the deal will last 16 years and will be reviewed every six years, but it does contain a caveat that a specific amount of aluminum and steel must originate from North America. The agreement will now require congressional approval.

The Trump administration will move ahead to deliberations with Canada, hoping to strike a deal before November’s midterm elections.

Despite the positive news, the US dollar is not rallying as the greenback shed 0.45% to 94.71, adding to its string of recent losses. The currency is still up 2.81% YTD. A strengthening buck is generally bearish for gold because it makes it more expensive for foreign investors to purchase.

While Commodity Futures Trading Commission (CFTC) data show that hedge funds and money managers have increased their short positions to a new high, there has been renewed activity in gold options, suggesting that investors believe the precious metal has found a floor.

In other metal commodities, December copper futures jumped $0.01, or 0.34%, to $2.73 per pound. December platinum futures surged $14.60, or 1.85%, to $804.00 an ounce. December palladium futures soared $14.70, or 1.85%, to $943.30 per ounce.

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