Gold Prices Pull Higher as US Currency Stabilizes

Gold futures were slightly higher in mid-day trade Tuesday, supported by a stabilization in the US dollar. While the US dollar was slightly higher mid-session Tuesday, its gains are retreating after a recent winning streak. Economic data released Tuesday morning included consumer inflation data.

Data released Tuesday from the Labor Department showed that in the 12 months through September, the CPI accelerated 1.5%, its biggest year-on-year increase since October 2014. Higher inflation is supportive of a Fed rate hike. While the latest data are not enough alone to entice the Fed to imminently increase rates, it is rate-hike positive that the US economy is strong enough to generate some inflationary pressures. In the recent past, persistently low inflation has concerned economists.

Meanwhile this week, the London Bullion Market Association’s 2016 conference is underway in Singapore. The conference is a key meeting of major gold market participants. Participants were recently surveyed on their expectations for the gold market, and they said that gold prices should rise about 7% by the time they meet again next October. They see gold at $1,347.40 per ounce, next year. Last year, the participants predicted that gold would be $1,160 per ounce in October 2016, just $100 below is actual, current price.

The participants expect gold will have an initial downward response to the Fed’s tightening, which participants expect by year-end. However, they expect that the Fed will likely hold off on further rate hikes in the first half of 2017, and that will support gold prices.

Furthermore, geopolitical and economic instability around the world will continue to support demand for gold as an investment. Investors have already taken the long view on gold so far this year. While they have been cutting net-long positions (bets on higher prices) in the past few weeks, earlier in the year ETF investors pushed up holdings to their highest level since 2013. Gold prices are up about 19% this year. Gold futures were last up 0.5% at $1,262.90 per ounce.

Donald is a strategist for He specializes in a fundamental approach while informing traders of relevant economic data. Actively trading since university, Donald trades indices and commodities. He earned his Bachelor's in Finance from Baruch College's Zicklin School of Business in New York City.