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Gold steadies at 3-week high as dollar wobbles http://www.marketwatch.com/story/gold-pulls-back-from-three-week-high-as-dollar-index-firms-2017-05-23

May 23, 2017

Gold futures on Tuesday were little changed, advancing only slightly from their highest finish in three weeks, tracking a slightly weaker dollar.

Financial markets were somewhat cautious, following a believed terror attack in the north of England. At least 22 people, including children, died late Monday in an explosion outside a concert venue in Manchester, England, which police believe was a suicide bombing attack. ISIS has claimed responsibility for the carnage.

Read: Death toll rises to 22 in suspected suicide bombing in Manchester

June gold GCM7, +0.01% was trading near break even, or less than 0.1%, at $1,261.80 an ounce. Gold settled Monday at $1,261.40 an ounce—the highest since April 28, according to FactSet data. Gold scored a roughly 2.1% advance last week, a trading stretch marked by rising volatility and political unrest in the White House. That was the largest such return since the week ended April 13.

Read: Market sentiment during Watergate shows how stocks might react to Trump

The ICE U.S. Dollar Index DXY, -0.06% was slightly lower at 96.9220. DXY’s drop last week wiped out the post-U.S. election climb. Stocks were indicated to continue their advance to a fourth-straight day.

Meanwhile, July silver SIN7, +0.40% rose 7 cents, or 0.4%, to $17.245 an ounce.

Early trade in both precious metals was wobbly.

“Gold is beginning to show signs of weariness. The dollar has stabilized and although the administration’s [tax-policy and infrastructure] goals may be delayed because of the Russian probe, physical off-take [in the gold market] remains weak in North America,” said Peter Hug, global trading director at Kitco Metals.

“The key catalyst will be the June Fed meeting, but that is also days away. The short term will be predicated on the dollar and equity values,” he said.

Philadelphia Federal Reserve President Patrick Harker is due to give a speech on the economic outlook at an event in New York at 5 p.m. Eastern.

Also on Tuesday’s economic docket, May flash readings on purchasing managers indexes for services and manufacturing come out at 9:45 a.m., and new home sales for April are due at 10 a.m.

Financial markets now rate the probability of the U.S. Federal Reserve’s policy-setting committee raising interest rates at its next meeting in mid-June as being roughly 70%. That is down from nearly 100% odds priced in earlier this month but still shows that many are convinced the Fed is ready to move again. Higher rates tend to make gold, which doesn’t bear a yield, less appealing relative to other investments.

Minutes from the Fed’s most recent meeting will be released Wednesday at 2 p.m. Eastern Time, which may deliver more guidance on the central bank’s plans to engineer another interest-rate hike at its policy meeting June 13-14.

Read: Fed minutes may quell fresh doubts about a June rate increase

Don’t miss: Washington ‘dysfunction’ won’t stop Fed from hiking interest rates in June

On Monday, Robert Kaplan, president of the Dallas Fed, said he expects the U.S. central bank to raise short-term interest rates twice more this year.

According to Hug, from a technical perspective, gold needs to close above the $1,265 level to encourage further participation from funds, with the $1,245 level indicating relative support. Silver momentum needs to clear the $17.22 hurdle to bring in a $17.55 initial target.