Gold prices edged above $1,200 Wednesday after scoring a roughly two-week high a day earlier, but concerns that Italy’s budget woes could ripple through global markets, the factor lifting gold this week, has faded, prompting only modest gains for the metal.
Read: Euro rebounds, then falls anew after report Italy will play by EU’s budget-deficit rules
December gold GCZ8, -0.10% switched between small losses and small gains, last up 30 cents, or less than 0.05% at $1,207.30 an ounce. Its finish Tuesday at $1,207 was the highest in nearly two weeks for a most-active contract, according to FactSet data.
The ICE U.S. Dollar index DXY, +0.09% which is heavily weighted toward the euro, was modestly firmer, up 0.1% at 95.60.
“The yellow metal certainly surprised markets by soaring from $1,190 to $1,208 during Tuesday’s session as uncertainty around Italy fueled risk aversion,” said Lukman Otunuga, research analyst at FXTM.
“With the precious metal powering higher against a broadly stronger dollar, the outlook certainly points to further upside in the near term,” he said in a daily note. “However, with the key fundamental drivers weighing heavily on gold still firmly intact, the medium- to longer-term outlook remains tilted to the downside.”
From a short-term technical perspective, “the breakout and daily close above the $1,200 psychological level could open a path toward $1,213 ahead of Friday’s U.S. jobs report,” Otunuga added.
Beyond the recent haven boost for gold, interest rates remain the chief driver for precious metals. They’re sensitive to Federal Reserve interest-rate increases because they can push up U.S. bond yields, which can reduce the attraction of nonyielding bullion, and tend to boost the dollar, which makes gold more expensive for buyers using other currencies.
The Fed is expected to raise its benchmark rate for a fourth time this year in December and expectations for that move and any further tightening could be informed by Friday’s payrolls data, particularly its wage component.
See: Economic calendar
Meanwhile, December silver SIZ8, +0.46% rose 5.7 cents, or 0.4%, to $14.75 an ounce, after posting a drop of more than 9% in the third quarter and tracking about 14% lower so far this year.
Also read: Palladium may soon be worth more than gold
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