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Gold’s Recent Surge Ends on Positive Trump Dollar Comments, Q4 GDP

January 26, 2018 at 16:51 by Andrew Moran

Gold prices have been surging over the last couple of days in the wake of market speculation that the US administration would depress the dollar to boost trade. After President Donald Trump uttered positive remarks about the greenback, the yellow metal tumbled, despite the US dollar still declining.

February gold futures plummeted $12.10, or 0.89%, to $1,351.60 per ounce at 15:24 GMT on Friday. Gold settled on Thursday at its highest level since August 2016 before its latest descent. The precious metal is still on track to record a 1.4% weekly gain.

Silver, the sister commodity to gold, is also in the red to end the trading week. March silver futures plunged $0.23, or 1.31%, to $17.38 an ounce. The white metal is poised for a weekly gain of about 1%.

On Friday, President Trump told CNBC at the World Economic Forum in Davos, Switzerland that he wants to see a stronger US dollar, and that Treasury Secretary Steven Mnuchin’s remarks were taken out of context.

The dollar is going to get stronger and stronger, and ultimately I want to see a strong dollar. Our country is becoming so economically strong again and strong in other ways, too.

The president’s reassurance could not help the US dollar as the greenback slipped 0.48% to 89.03. A weaker currency is good for dollar-denominated commodities like gold and silver because it makes it cheaper for foreign investors to purchase. Year-to-date, the dollar is down more than 3%.

Precious metals were further affected by positive economic data. According to the Bureau of Economic Analysis (BEA), the fourth quarter gross domestic product (GDP) expanded at a 2.6% annual pace. Consumer spending rose 3.8%, the biggest increase in two years, and business spending on equipment jumped 11.4%. Also, investment in new housing advanced 11.6%, while outlays on structures increased 1.4%.

Inflation appears to be on the rise as the Personal Consumption Expenditures (PCE) price index edged up at a 2.8% annual rate, the biggest jump in seven years. The core PCE also climbed at a sluggish 1.9%.

The Federal Reserve will hold its first 2018 Federal Open Market Committee (FOMC) policy meeting next week. Traders will pay attention to any hints pertaining to interest rates. Gold is generally sensitive to a rising-rate environment because it lifts the opportunity cost and sends investors into yield-bearing assets.

If you have any questions and comments on the commodities today, use the form below to reply.

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