WSJ: Gold Prices Higher But Fed Rate Increase Prospects Cap Gains
Gold prices were slightly higher on Friday, but the prospects of a stronger dollar and further good economic news out of the U.S. will likely keep a cap on the price of the metal in the coming weeks.
Gold missed out on the big gains across commodities on Thursday, as the positive U.S. economic data that pushed oil and metals higher dulled traders interest in safe haven assets and increased the likelihood of a September interest rate rise.
On Friday gold traded slightly higher on a day when many commodities appeared to lack firm direction.
The most actively traded contract, for December delivery, was recently up $3.50, or 0.3%, at $1,126.10 a troy ounce on the Comex division of the New York Mercantile Exchange.
Given big moves in its price since the beginning of August, gold is undergoing a bit of consolidation, said Joni Teves, an analyst at UBS AG.
U.S. rates will likely remain the big focus for gold buyers, with U.S. payroll numbers next week a key point for the market. Gold doesn’t pay interest or dividends so suffers in comparison to yield-bearing assets when rates climb. Higher rates would also likely boost the dollar, making the greenback-denominated gold more expensive for most buyers.
The market has gradually moved toward seeing a U.S. rate rise more likely in December. This view seemed to be holding up on Friday, despite the slew of positive U.S. data on Thursday.
“The very fact that gold is holding up above $1,100 suggests that this market thinks a September rate hike has been shifted to December,” said Howie Lee, an investment analyst at Phillip Futures, in a note. “Until it happens, gold will continue to have to play a guessing game with the Fed.”
