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Gold's win streak at risk as dollar crawls up from 10-month lows


MARKETWATCH 11:28 AM ET 7/19/2017
By Myra P. Saefong, MarketWatch , Rachel Koning Beals

Stock gains are capping yellow metal's upside

Gold prices moved lower Wednesday as a weaker dollar stabilized, putting the yellow metal at risk of snapping a three- day win streak that had driven it to the highest level for July.

August gold edged down by $1.80, or 0.1%, to $1,240.10 an ounce, trading between $1,235.10 and $1,243.50. The contract settled at $1,241.90 on Tuesday--the highest since June 30, according to FactSet data. Analysts continued to eye support at the 200-day moving average around $1,230.

The dollar index scratched its way up from the 10-month lows hit earlier this week amid fading prospects for more U.S. interest-rate hikes and the threat of Washington gridlock.

The ICE U.S. Dollar Index , which compares the buck against a half-dozen other currencies, was up 0.2% at 94.813. The WSJ Dollar which looks at the currency against a wider basket of rivals, was little changed at 86.96.

"A main bullish input for the precious metals markets has been a seriously eroding U.S. dollar index. The dollar bears have the solid overall near-term technical advantage amid a price downtrend that has been in place all year long," said Jim Wyckoff, senior analyst at metals trading firm Kitco.

Gold continued to churn in a narrow intraday range after housing data hit. Builders broke ground on more homes in June (http://www.marketwatch.com/story/housing-starts-jump-as-construction-home-buying-get-back-on-track-2017-07-19), and figures from a prior month were revised up, allaying some fears that the housing recovery had stumbled in the spring.

The data are another piece of the economic puzzle that could support or refute the likelihood for a dollar-supportive U.S. rate hike in the second half of 2017, once nearly a foregone conclusion but lately looking less likely amid a mixed bag of economic data.

"Given the continued weakness of core inflation, we now expect the Fed to delay the next interest rate hike until December," analysts at Capital Economics said in a note released Wednesday. "Accordingly, while there is a chance that the statement following next week's FOMC meeting will be used to announce the start of balance sheet normalization in September. We don't expect any hints that a rate hike is imminent."

The dollar weakened early this week but stocks only briefly paused their march to fresh records as stumbles in getting a health-care bill passed amplified doubts about President Donald Trump's ability to get passage of traditionally Wall Street friendly changes, including tax cuts and other laws that may boost the buck. Stocks tested new records (http:// www.marketwatch.com/story/tech-stocks-on-track-to-set-another-record-even-as-sp-futures-struggle-2017-07-19) again on Wednesday, a factor holding back haven gold.

Read:GOP health-care bill scuttled; McConnell calls for repeal vote (http://www.marketwatch.com/story/health-care- overhaul-seems-sunk-as-two-more-republicans-oppose-senate-bill-2017-07-17)

And see:How the delayed health-care vote may also slow tax reform (http://www.marketwatch.com/story/how-the-delayed- health-care-vote-may-also-slow-tax-reform-2017-07-17)

A weaker dollar tends to be supportive to commodities, like gold, priced in the currency, making them more attractive to buyers using weaker monetary units.

"The other 'outside market' [influencing gold] on Wednesday morning sees Nymex crude oil futures slightly higher (http://www.marketwatch.com/story/oil-prices-ease-ahead-of-data-that-may-show-rising-us-inventories-2017-07-19),"; Wyckoff said. "Recent upside price action suggests a market bottom is in place for oil and that has also been supportive for the raw commodity sector, including the precious metals. However, talk of OPEC overproduction and big U.S. stockpiles will likely limit the upside for crude."

Among other metals, September silver fell 6.3 cents, or 0.4%, at $16.205 an ounce.

Silver bears still have the overall near-term technical advantage, however there are early chart clues that a near- term market bottom is in place, Wyckoff said. He pegged the next upside target at a close above solid technical resistance at $17 and the next downside price breakout objective for bears at a close below $15.

Read:How silver could bounce back after a 'bearish 2017' (http://www.marketwatch.com/story/how-silver-could-bounce- back-after-a-bearish-2017-2017-07-13)

October platinum also fell by $5.80, or 0.6%, to $924.60 an ounce, but September palladium traded at $866.95 an ounce, up $2.55, or 0.3%.

And in exchange-traded products, the SPDR Gold Shares (GLD) fell 0.1%, the VanEck Vectors Gold Miners ETF (GDX) lost 0.3%, and the iShares Silver Trust(SLV) was down 0.2%.

-Rachel Koning Beals; 415-439-6400; [e-mail]


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