Gold prices ticked higher in Europe on Monday, but held near the lowest level since May on expectations for a Federal Reserve rate hike and fiscal stimulus by President-elect Donald Trump. Market analysts warned that the outlook for gold remains cloudy in the near-term because a U.S. interest rate hike in December is now a near-certainty.
Gold prices are down more than 7% so far this month amid hopes that increased U.S. fiscal spending under a Trump administration will spur economic growth and inflation, which would ultimately lead to higher interest rates.
The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced.
The greenback hovered close to the prior session’s 14-year high against a basket of major currencies early on Monday, amid a rally driven by the U.S. presidential election and expectations that the Federal Reserve will raise interest rates next month.
The dollar index was recently at 101.20, after climbing to 101.54 on Friday, a new level since April 2003.
A stronger U.S. dollar usually weighs on gold, as it dampens the metal’s appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
Also on the Comex, silver futures for December delivery inched up 7.9 cents, or 0.48%, to $16.70 (£13.53) a troy ounce during morning hours in London, after falling to its lowest level since June 8 at $16.43 (£13.31) on Friday.
Elsewhere in metals trading, copper futures rallied 5.2 cents, or 2.11%, to $2.521 (£2.04) a pound, amid expectations that President-elect Donald Trump’s plans to ramp up fiscal spending and cut taxes will spur economic growth and inflation.
The yellow metal is regarded as a leading indicator of the global economy. It is used in the construction of buildings, power generation and transmission and the manufacture of consumer electronics.