Gold retreats from 6-month high

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December 21, 2018 11:55am NYSE:GDX NYSE:GLD


From Myra P. Saefong & Mark DeCambre: Gold futures pulled back from a six-month high Friday, but bullion was set to finish the week higher as a recent downturn in the stock market — underpinned by the Federal Reserve’s policy message — helped to drive demand to so-called haven assets.

Gold for February delivery on Comex GCG9, -0.49%  was down $5.20, or 0.4%, at $1,262.70, with the contract on pace for a weekly increase of 1.7%, based on last Friday’s settlement.

Read: Gold’s down for the year, but set to shine in 2019

Though prices, based on the most-active contracts, have strengthened in recent months to trade more than 5% higher quarter to date, they have still lost nearly 4% for the year so far.

“With the U.S. having very high real rates and gold offering no yield, the yellow metal falls in U.S. dollar terms,” said Frank Holmes, chief executive and chief investment officer at U.S. Global Investors. Overall, however, he said he’s “very surprised that gold has held up so well with the strong U.S. dollar.”

On Friday, the ICE U.S. Dollar Index DXY, +0.29%  rose 0.4%. It was poised for a weekly loss of 0.8%, but traded higher for the quarter and year to date.

“The metal has enjoyed a strong inverse relationship with the greenback throughout 2018, and the relationship is playing out today,” said David Madden, market analyst at CMC Markets, in a Friday research note.

“The metal has been driving higher since mid-August, and a break above the $1,265 region, might bring $1,284 into play,” he wrote.

Read: Here’s what 2019 may have in store for commodities such as gold and natural gas

Quarter to date, gold has outperformed the S&P 500 SPX, +0.10% with the benchmark stock index down 15% from the end of September.

Risk assets took a hit this week, including crude-oil prices and the Dow Jones Industrial Average DJIA, +0.42% and S&P 500 index SPX, +0.10% which have been in selloff mode after the Fed raised its target for the federal-funds rate by a quarter point to a range between 2.25% and 2.50%. The central bank also said, however, that it has now penciled in two rate hikes in 2019, not the three moves seen in September.

“I think gold has done well on a relative basis and will surprise to the upside in the new year,” said Holmes, who continues to “advocate a 10% weighting in the yellow metal, rebalancing annually.”

“Five percent of that should be in gold bullion or beautiful gold jewelry, and the other five percent should be in well managed gold mutual funds or ETFs,” he said.

In Friday dealings, gold lost some ground after data from the Commerce Department revealed that U.S. consumer spending grew faster than incomes in November. The University of Michigan’s consumer-sentiment gauge also registered a final December reading of 98.3, better than the 97.2 expected by economists polled by MarketWatch.

A final reading of third-quarter gross domestic product, a broad measure of the goods and services produced across the U.S., rose at a 3.4% seasonally and inflation-adjusted annual rate. Forecasts had been for a GDP print of 3.5%. Meanwhile, durable-goods orders increased to an adjusted 0.8% in November from the prior month, matching average estimates from economists polled by MarketWatch.

Among other metals traded on Comex, March silver SIH9, -0.87%  lost 10.4 cents, or 0.7%, at $14.765 an ounce, but was on track for a weekly gain of roughly 0.9%.

March copper HGH9, -0.54%  shed 0.5% to $2.683 a pound, with prices down about 2.9% on the week. January platinum PLF9, +0.15% lost 0.3% to $793.80 an ounce, on track for a weekly rise of 1.1%, while March palladium PAH9, -2.25%which marked another record settlement this week on concerns over tight supply and growing demand, was down 2.5% at $1,162.60 an ounce–ready to post a weekly loss of 0.9%.

See Video on the auto industry’s influence on palladium and platinum prices

The SPDR Gold Shares exchange-traded fund GLD, -0.24%  fell 0.2%. but was up about 1.7% for the week.

The SPDR Gold Shares (GLD) was trading at $119.05 per share on Friday morning, down $0.19 (-0.16%). Year-to-date, GLD has declined -3.72%, versus a -7.35% rise in the benchmark S&P 500 index during the same period.

GLD currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #1 of 35 ETFs in the Precious Metals ETFs category.

This article is brought to you courtesy of MarketWatch.

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