Gold futures settled higher for a second straight session on Monday, getting a boost in investor interest from weakness in the U.S. stock market as investor wariness over geopolitical events persists.
The market also awaited the Federal Reserve’s latest monetary policy decision, following a two-day meeting that ends Wednesday.
Gold for February delivery GCG9, -0.08% on Comex, the contract with the highest cumulative volume, tacked on $5, or 0.4%, to settle at $1,303.10 an ounce for its highest finish in about seven months. The April contract GCJ9, -0.09% which boasts significantly higher open interest, added $5.10, or 0.4%, to finish at $1,309.30. April gold settled Friday at its highest since June.
March silver SIH9, -0.19% added 6.6 cents, or 0.4%, at $15.765 an ounce.
A partial U.S. government shutdown temporarily ended late last week, although most market participants, and President Donald Trump himself, don’t appear to believe the halt of the shutdown will last.
What’s more, Tuesday marks another vote in U.K. parliament on a Brexit deal with the European Union. The current version presented by Prime Minister Theresa May is similar to a previous offering, leaving some analysts guessing that the deal will be rejected again.
All told, these factors, combined with the midweek Fed meeting, provide an uncertain climate favorable to haven gold, which is trading more than 1% higher so far this month.
“We believe that the U.S. Fed will not raise interest rates any further on Wednesday because economic concerns have increased,” said Carsten Fritsch, commodities analyst at Commerzbank, in a note. “Though this should have a positive impact on gold, the publication of a robust labor market report in the U.S. could have a dampening effect again on Friday.” Economists polled by MarketWatch expect Friday’s jobs report to show 177,000 jobs added in January after December’s more robust 312,000 new additions to the payrolls.
Higher interest rates tend to support the dollar, proving a drag on dollar-priced gold. What’s more, higher rates can dull the appeal of nonyielding gold and signs the Fed has slowed its approach to tightening historically low monetary policy has lifted gold late last year into early 2019.
The Fed “has made considerable efforts in recent weeks to stress its data dependency and flexibility regarding further rate hikes” analysts at UBS Global Wealth Management’s chief investment office wrote in a note Monday. “Markets are now pricing in no rate hikes this year, and [Fed] Chair Jerome Powell will need to reinforce the accommodative rhetoric at this week’s Federal Open Market Committee (FOMC) press conference.”
Against that backdrop, the ICE U.S. Dollar Index DXY, +0.03% a measure of the currency against six major rivals, was off 0.1% at 95.699.
U.S. benchmark stock indexes traded broadly lower as gold futures settled, dragged down in particular by a weaker-than-expected quarterly showing for industrial equipment manufacturer Caterpillar.
In other metals trade, March palladium PAH9, +0.16% fell 2.3% to $1,289.30 an ounce. April platinum PLJ9, +0.07% fell 0.5% to $814.50 an ounce. March copper HGH9, +0.21% fell 1.8% to $2.68 a pound.
Among exchange-traded funds, the SDPR Gold Shares GLD, +0.35% was up 0.3%. The VanEck Vectors Gold Miners ETF GDX, +1.27% rose 0.9%.