Rachel Koning Beals
Gold futures slumped Monday, unable to immediately add to the roughly 1% gain tallied last week when uncertainty around the timing of the Federal Reserve’s next interest-rate hike lifted the yellow metal despite some strength in the U.S. dollar.
Early Monday, December silver SIZ6, +0.81% diverged with its yellow-metal cousin, gaining 15 cents, or 0.8%, to $17.64 an ounce. Silver ended last week with a narrow 0.3% gain.
The U.S. dollar strengthened Thursday and Friday against the euro, in particular, in the wake of the European Central Bank’s decision to leave its monetary policy unchanged and accommodative.
On Monday, the ICE U.S. Dollar Index, DXY, -0.11% a measure of the U.S. currency against six rivals, was little changed near 98.63. The dollar and gold often move inversely because a firmer buck leaves dollar-priced commodities less desirable to purchasers using another currency.
U.S. stocks are headed for early gains, lifted by a flurry of merger news. Stock gains could limit demand for gold as investors seek out higher-risk investments.
Central bank decision-making comes against the backdrop of intensifying inflation watching.
“We’ve recently gotten data from several countries that suggest inflation may be starting to return, or at least that the global deflation scare may be over. Consumer price inflation in the U.S., Britain, and most crucially, China, has turned higher recently,” said Marshall Gittler, head of investment research at FX PRIMUS, in a commentary.
“The return of inflation would probably be positive for the dollar,” he said.
That’s likely true in the short term, while the risk of deeper inflation could eventually restore gold’s hedging appeal, most analysts say.
Futures markets still see a better-than-60% chance that the U.S. further distances itself with other major economy monetary policy with an interest-rate hike in December, according to the CME FedWatch tool.
Monday’s U.S. economic calendar is light, featuring a Chicago Fed release on national economic activity. See the entire economic calendar for the week, including housing and consumer data.
In related exchange-traded fund trading, the SPDR Gold Trust GLD, +0.07% slipped 0.1% after a weekly rise of 1.3%, while the VanEck Vectors Gold Miners ETF GDX, -0.77% gave up 0.1% after its weekly gain of 7.2%.