Commodity Blog

Gold futures are posting modest gains at the end of the trading week after the yellow metal was firmly planted below the crucial $1,200 threshold earlier this week, falling to their worst levels in six weeks. The descent came after the US central bank raised interest rates, meeting market expectations.

December gold futures rose $4.10, or 0.35%, to $1,191.70 per ounce at 14:32 GMT on Friday. The yellow metal is poised for a weekly decline of about 1% and it is set for its longest monthly losing streak since 2016. Year-to-date, gold is down more than 10%, leading it to suffer one of its worst annual performances in recent history.

Silver, the sister commodity to gold, is also rallying to finish the trading week. December silver futures tacked on $0.34, or 2.36%, to $14.63 an ounce. The white metal is on track to advance 2.1% this week, but it is still down 15% so far in 2018.

On Wednesday, the Federal Reserve raised the key federal-funds rate by a quarter-point, from 2% to 2.25%. The Federal Open Market Committee (FOMC) noted that it is on track for a rate hike in December, and potentially as many as three times in 2019. Moreover, Fed officials removed the “remains accommodative” statement on rates, which means the central bank has some flexibility on how it can move on rates moving forward.

Gold is generally sensitive to a rising-rate environment because it lifts the opportunity cost and sends investors into yield-bearing assets. However, the Fed’s suggested dovish position has not helped US Treasury notes as the yield on the 10-year note has fallen 0.4% over the last two days, but it is still up 15% in 2018.

The US dollar has been gaining on the policy announcement as the greenback jumped 1.15% this week. A stronger buck is bad for commodities pegged in dollars because it makes it more expensive for foreign investors to purchase.

Meanwhile, President Donald Trump complained this week about China meddling in the upcoming midterm elections, something that has contributed to the escalating trade tensions. Beijing has denied that it is intervening into the campaign, but Trump says that the world’s second-largest economy is posting newspaper ads lambasting the nation’s trade negotiations.

Despite the deteriorating trade talks, it has not been bullish for gold, which is typically seen as a safe-haven asset at times of volatility. Instead, traders have poured into the greenback, a currency that has performed well compared to a basket of other currencies.

The rest of the metals markets is surging. December copper futures tacked on $0.02, or 0.8%, to $2.80 a pound. December platinum futures added $8.80, or 1.08%, to $823.50 per ounce. December palladium futures rose $6.60, or 0.62%, to $1,077.80 an ounce.

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