Gold futures gained Wednesday, leaving the contract on track to finish above the closely watched $1,200 line for a seventh straight session.
“Gold is likely to continue trading in its recent range into the [Federal Reserve] meeting next week,” said Peter Hug, global trading director at Kitco Metals. Traders will focus on the comments from the central bank when it makes its policy statement on Sept. 26 for “indications of futures rate-hike guidance.”
December gold GCZ8, +0.49% was up $4.50, or 0.4%, at $1,207.40 an ounce, as the dollar index DXY, -0.03% flitted between small gains and losses. The dollar and gold, which is chiefly priced in the U.S. currency, tend to move inversely. The dollar index is down 0.5% month to date, trimming its 2018 gain so far to about 2.8%.
Gold held its gain and the dollar index remained stuck near unchanged after data showed a rise in housing starts, a report that fits in with expectations that the Fed will nudge interest rates higher when it meets next week.
Trey Reik, senior portfolio manager, at Sprott Asset Management, highlighted flip in positioning revealed in Commodity Futures Trading Commission data from earlier this month as a possible portent of more gains for gold. The metal is down over 9% so far this year.
“For the first time in 17 years, commercial participants in gold futures flipped their COMEX positioning to net long,” he said. “In gold pits, commercials are generally regarded as smart money because, unlike hedge-fund speculators, gold commercials have little investment agenda outside hedging jewelry inventories, executing central bank directives and serving as funding foil to managed money on COMEX.”
“This does not mean commercial activity boasts infallible predictive value,” he said.
“Throughout gold’s two-year advance to September 2011 highs, for example, commercials maintained record short exposures. Such is the nature of the predominantly hedging role played by commercial players in gold markets. However, at least since the waning months of gold’s 20-year bear market which ended in 2001, on each occasion commercials have abandoned their hedging posture almost entirely, strength in the gold price has proved imminent,” Reik said.
Meanwhile, some industrial metals markets remained on the defensive amid the latest trade developments.
On Tuesday, President Trump said the U.S. had “no choice” but to levy another $267 billion in duties on China. The move comes on top of announced tariffs on about $200 billion in Chinese goods late Monday; Trump also threatened additional penalties as part of his campaign to pressure Beijing to change its commercial practices.
In response, China retaliated with tariffs of 5% to 10% on $60 billion worth of U.S. products that will take effect Sept. 24 and said it may introduce more measures if the U.S. goes ahead with higher tariffs, according to The Wall Street Journal.
December copper HGZ8, +0.15% eased 0.2% to $2.725 a pound in Wednesday dealings.
But October platinum PLV8, +1.29% rose 0.8% to $821.60 an ounce and December palladium PAZ8, +2.23% rose 1.7% to $1,022.30 an ounce.
Palladium settled Tuesday above $1,000 for the first time since mid-June, according to FactSet data. It’s poised to end higher for a sixth-consecutive session.
“In our mind, the sharp rally action in palladium this week is probably the result of aggressive forward advance purchasing by China because of tariff maneuvering but also because of long-term strategic [electric vehicle] planning,” analysts at Zaner Precious Metals wrote in a note Wednesday.
“It is also likely that increased Chinese infrastructure spending is providing a lift to base commodities as the Chinese are doing everything in their power to stimulate their economy against the drag from the trade war,” they said.
December silver SIZ8, +0.85% rose 0.5% to $14.255 an ounce. It holds just above the recent low of $14.142, set late last week, which marked the lowest settlement for a most-active contract since January 2016, according to FactSet data.
Read: Drop in silver prices to 32-month lows prompts sellout of Silver Eagle coins at U.S. Mint
Among the exchange-traded funds, the popular SPDR Gold Trust GLD, +0.53% rose 0.4%, while iShares Silver Trust SLV, +0.98% added 0.5%. The VanEck Vectors Gold Miners ETF GDX, +2.55% rose 1.7%.
Providing critical information for the U.S. trading day. Subscribe to MarketWatch's free Need to Know newsletter. Sign up here.
