The gold price hit a two-month low on Friday (October 6), as the latest US jobs report pointed to another Federal Reserve interest rate hike later this year.
“The entire newsflow is bearish. [We’re seeing] a firmer US dollar, rising stock markets, economic optimism, ETF outflows, lacklustre demand in Asia, a poor technical picture [and a] still large overhang of speculative long positions,” he added.
A hawkish tone from the Fed has increased worries over another interest rate hike in December. Most policymakers are supportive of another rate increase, but on Friday, Dallas Fed President Robert Kaplan said he remains undecided on the matter.
In general, higher interest rates are bad news for gold, as they increase the opportunity cost of holding non-yielding assets such as the yellow metal.
“The Fed has recently reinforced intentions to normalize monetary policy and a rate hike in December is now increasingly priced in,” Bank of America Merrill Lynch analyst Michael Widmer wrote in a report. “This is bearish in an environment where inflation has not yet picked up, so we see only limited upside to gold into year-end.”
Meanwhile, the US dollar hit its strongest point in 10 weeks, hurting gold demand. That’s because a stronger greenback makes commodities priced in dollars more expensive for investors using other currencies.
For Brien Lundin, president and CEO of Jefferson Financial, the future of the US dollar, which is determined by the attitude of the markets to Fed policy, will be a key issue to watch going forward.
“Gold investors really need to watch monetary policy and the flow of economic data in the US,” he recently told the Investing News Network. Click here to read about what other factors he thinks will impact gold in Q4.
As of 1:00 p.m. EST on Friday, the gold price was $1,273.60 per ounce. Click here to find out more about what happened to gold in Q3 and what’s ahead for prices.
Looking over to silver, the white metal was on track to remain neutral for the week. As of 1:00 p.m. EST on Friday, the white metal was at $16.81 per ounce. Click here to learn more about where silver prices are going in the last few months of the year.
Palladium continues to hold above platinum after trading last week at a premium to platinum for the first time since 2001. On Friday, palladium was up 0.6 percent, trading at $944.80 per ounce, while platinum was up 0.1 percent, changing hands at $912.30 per ounce.
Lastly, spot oil edged lower on Friday and was on track for a weekly decline, pressured by profit taking and oversupply concerns.
November West Texas Intermediate crude fell 2.7 percent, to $49.44 a barrel, on the New York Mercantile Exchange, while Brent crude for December delivery on London’s ICE Futures exchange was down 2.3 percent, to $55.72 a barrel.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.