Gold inches lower, near-term downside pressure expected

The spot gold price inched lower during Asian trading hours on Friday, October 14, with market participants seeing further downside for the yellow metal in the near-term amid US dollar strength.

Spot gold was last at $1,256.40-1,256.80 per ounce, down $0.95 from Thursday’s close. Trading ranged at $1,255.80-1,259.10 so far on Friday.

With the US dollar index remaining steady above 97.50, downside pressure on gold will persist for the coming weeks if the metal is unable to break higher out of its current range of $1,250-1,265, Commerzbank said in a report late on Thursday.

The US dollar has been climbing since late September on rising expectations of a US rate hike in December – the index reached a seven-month high of 98.13 on Thursday. It was last at 97.61 on Friday, up 0.07% from its close on Thursday.

Gold has come under pressure in recent weeks as investors worry about the threat of higher interest rates and an end to monetary easing, Daniel Hynes, senior commodity strategist at ANZ Research, said in a report on Thursday.

“In the short-term, the impending rate hike in the US will remain a headwind. However, once passed, we expect prices to continue their drive towards $1,375 in the first quarter of 2017,” he said.

The environment for gold remains positive given rising inflation expectations, geopolitical issues and signs of improving physical demand, he noted.

In data, China released better-than-expected inflation data on Friday. Chinese consumer price index rose 1.9% in September, beating for forecast of 1.6% and August’s reading of 1.3%.

China’s producer price index increased 0.1% in September, also better than consensus of a 0.4% decline and August’s reading of -0.8%.

In US data released on Thursday, unemployment claims from September 29 through October 6 came in at 246,000, below the 252,000 forecast. Import prices month-over-month in September were in-line with expectations at a 0.1% gain.

US data due later on Friday includes core retail sales, PPI, retail sales, core PPI, preliminary UoM consumer sentiment, business inventories, and preliminary UoM inflation expectations.

In other commodities, the Brent crude oil spot price decreased 0.03% to $51.91 per barrel, and the Texas light sweet crude oil spot price slipped 0.1% to $50.53 recently on Friday.

In equities, the Shanghai Composite fell 0.24% to 3,053.52 so far today.

In other precious metals, silver was last at $17.415/17.435, down $0.04. Platinum rose $6 to $932/938, and palladium increased $2 to $634/642 recently on Friday.

On the Shanghai Futures Exchange, gold for December delivery was last unchanged at 273.85 yuan per gram, and the December silver was flat at 3,981 yuan per kilogram.

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