Gold Rises On Geopolitical Worries; Chinese Buying Returns
Gold prices have been lifted by fresh geopolitical worries surrounding North Korea, along with the return of Chinese buying after a week-long holiday in the key gold-consuming nation, traders say. Comex December gold traded as high as $1,288 an ounce overnight, its most muscular level since Sept. 29. “Bullion saw weakness around the U.S. payrolls print on Friday, however, [gold] recovered sharply following reports out of Russia stating that North Korea is preparing to test a long-range missile that has the potential to reach the U.S. West Coast,” says trade house MKS (Switzerland) S.A. Commodities brokerage SP Angel also cites the escalation of tensions follow U.S. President Donald Trump’s suggestion that “only one thing will work” to resolve ongoing North Korean developments. The geopolitical developments caused the U.S. dollar to retreat from its 12-week highs, SP Angel says. Meanwhile, MKS reports that Chinese buying also played a role in gold’s newfound strength. “Interest out of the Far East saw bullion off the session low following muted early demand and toward $1,280 in early Shanghai trade,” MKS says. “The on-shore premium pushed toward $10 on the back of USD/China [U.S. dollar/yuan] weakness, and continued underlying physical demand kept price action buoyant throughout the afternoon.” As of 8:34 a.m. EDT, December gold was $8.40 higher at $1,283.20.
By Allen Sykora of Kitco News; firstname.lastname@example.org
BBH: Markets Accept ‘Likelihood Of A December Fed Hike’
Monday October 09, 2017 08:59
Financial markets still anticipate another Federal Reserve hike in U.S. interest rates in 2017 but nevertheless will be paying close attention to retail sales and the Consumer Price Index data this week, says Brown Brothers Harriman. “Over the past few weeks, the markets have come to accept the likelihood of a December Fed hike,” BBH says. “U.S. interest rates have adjusted. The pricing of December Fed funds futures contract is consistent with around an 80% chance of a hike. The two-year yield is trading at the upper end of what is expected to be the Fed funds target range at the end of the year, after slipping below the current range a month ago.” U.S. nonfarm payrolls data released on Friday – showing a 33,000 job decline last month – was distorted by hurricanes, BBH says. Nevertheless, the hourly earnings are pointing to rising wages, the firm continues. Retail sales and the CPI report are both due out Friday. “To be sure, the data will not be clean in the sense that some components will be distorted by the storms,” BBH says. “The distortion will likely be on the upside. Gasoline prices surged, which will help flatter the headline, but there is more. The market for products that are necessities in the storm-ravaged areas, such as household appliances and the like, appear relatively tight in terms of inventory/sales ratios. That said, the transitory headwinds that some Fed officials had noted dampening inflation, are in fact subsiding. Also, related to this is the fact that the breadth has been increasing.”