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Gold Prices Steady Despite Prospect of Global Monetary Policy Tightening

CommoditiesJan 05, 2018 12:59PM ET
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Investing.com – Gold prices traded flat shrugging off the prospect of global monetary policy tightening, while a subdued US jobs data limited losses.

Gold futures for February delivery on the Comex division of the New York Mercantile Exchange rose by $0.20, or 0.02%, to $1,321.80 a troy ounce.

The Labor Departed reported the US economy created just 148,000 jobs in December, below the 190,000 jobs expected by economists, while wage growth, was in line with expectations, rising 0.3%.

The subdued jobs report reduced investor expectations for a more aggressive path to higher interest rates, said TD Securities, as the Federal Reserve would likely need to see more “convincing evidence” of inflationary pressures prior to raising rates in March.

Jim Vogel, strategist at FTN , however, said that the jobs report does little to change the Federal Reserve’s trajectory for rate increases in 2018, as the trend of job creation remained solid after the economy created more than 200,000 jobs in November and October.

Gold prices have remained steady in recent weeks despite investor expectations for tightening global monetary as both the Bank of England and Bank of Canada are expected to follow the Fed's lead and raise rates this year.

The Bank of Canada could raise rates as soon as the end of the January, CIBC’s Nick Exarhos said, as Friday’s bullish labor market report strengthened the central bank’s case to raise rates.

Nomura’s George Buckley – who correctly predicted that the Bank of England would hike interest rates in November – said recently that there is room for more rate hikes, estimating the central would raise rates four times by the end of 2019 to curb inflation, which is running well above target.

In a rising interest rate environment, investor appetite for gold weakens as the opportunity cost of holding the precious metal increases relative to other interest-bearing assets such as bonds.

In other precious metal trade, silver futures fell 0.06% to $17.28 a troy ounce, while platinum futures gained 0.49% to $975. Platinum futures have made a bold start to the year on fears that rising demand for the autocatalyst metal would further tighten supplies.

Copper fell 0.98% to 3.23, while natural gas fell 3.33% to $2.78. The fall in natural gas comes amid data Thursday showing natural gas storage fell by 206 billion cubic feet, missing expectations for a draw of 219.43 billion cubic feet.

Gold Prices Steady Despite Prospect of Global Monetary Policy Tightening
 

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