Featured # Mutual Funds & ETFs | 2 years ago

Gold Rebounds as Declines in U.S. ISM Pressures the Dollar

On Wednesday Gold futures rebounded to their highest level in almost three months, as a fall in the U.S ISM services index pressured the dollar, heightening the yellow metal’s investment appeal. Prices had traded a bit lower early Wednesday following a report on U.S private sector hiring beat expectations even as it reported a slowdown in the rate of hiring. The data offers indications on the broadly followed U.S government employment report set to be released on Friday, which possibly will help guide the Federal Reserve’s monetary policy. The ISM survey hinted growth in the services sector has slowed, adding a drumbeat of data that has sounded a similar refrain.

April gold hiked $8.10, or 0.7%, to trade at $1,135.30 an ounce. Prices that closed respectively lower on Tuesday would ease at their highest levels since November if the morning holds steady. Next, Wednesday’s increases for metal came despite a spike in oil prices, and the U.S stock market. Losses in those markets had helped to back up gold’s attractiveness as a safe-haven in recent weeks. “Safe-havenand chart-based buying continue to support the yellow metal amid a still-uneasy world marketplace,” stated Jim Wyckoff, senior analyst at Kitco.com. “Gold bulls also have technical momentum on their side.”

The Fed increased interest rates in December for the first time in nearly a decade, but held them steady following its policy meeting last week as it looks to economic and financial developments to decide its next move. Higher rates can increase the dollar and make gold metal less competitive against interest-bearing investments. “The Fed is largely in the watch and wait mode, and any rebellious economic condition will push their hand to make a U-turn on their current policy,” quoted Naeem Aslam, chief market analyst at AvaTrade. For the time being a pullback in the ICE U.S dollar index after news that the ISM services index fell to its lowest levels since February 2014, delivering support for dollar-denominated gold.

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