Gold Set for Third Weekly Gain With US Data, Election in Focus
Gold looks to be headed for its third weekly advance after the latest US data reaffirmed bets the Federal Reserve will conduct its monetary easing in a measured way.
Sentiment among US consumers increased in October to a six-month high as households grew more upbeat about buying conditions, partly because of cheaper financing costs. The University of Michigan’s measure of buying conditions for durable goods also rose to a four-month high as more than half of consumers indicated they expect further interest-rate relief in the coming year.
Recent economic data have underscored economic resilience in the US, causing traders to scale back expectations for aggressive easing by the Fed. They will now focus on data due next week for cues on the scale of the US central bank’s loosening policy. Lower rates tend to benefit bullion as the metal doesn’t pay interest.
Gold has surged by about a third this year, peaking at $2,758.49 on Wednesday. The rally has intensified in recent months as geopolitical risks in the Middle East are boosting haven demand and traders assess risks from the upcoming US presidential election. Money managers have played their part, with hedge funds raising net-long positions in gold and investors adding to exchange-traded fund holdings.
If price moves hold, bullion is set for a weekly gain of about 0.6%, despite strength in the US dollar and bond yields, which tend to drive gold prices lower.
This “breakdown in typical market correlations indicates that traders are hedging against a potential ‘Red Sweep,’ a scenario where Republicans gain control of both the White House and Congress,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. Such a political shift could lead to an unfunded spending agenda, further increasing the debt-to-GDP ratio and raising long-term fiscal sustainability concerns, according to Hansen.
Spot gold was up 0.1% to $2,739.63 an ounce at 10:52 a.m. in New York. The Bloomberg Dollar Spot Index held steady and is up about 0.5% for the week. Silver rose while platinum fell. Palladium slid as much as 2.9% before erasing the losses to trade 3.4% higher. It surged almost 9% on Thursday on reports that the US asked allies to consider sanctions on Russian exports.
Source : Bloomberg
