Gold futures on Tuesday looked likely to extend a rally, albeit tepidly, that has returned prices to July peaks, with a generally upbeat tone remaining even as global stock markets climbed.
Fresh weakness for a leading dollar index helped gold hold higher ground as December gold GCZ8, +0.15% rose $2.10, or 0.2%, to $1,232.40 an ounce. A settlement around this level would mark the highest since July 31, according to FactSet data.
Meanwhile, December silver futures SIZ8, +0.16% rose 8.3 cents, or 0.6%, to $14.81 an ounce.
U.S. benchmark stock indexes were on the rise Tuesday, a day after a technology-driven retreat. Stocks have been highly volatile amid mounting concerns over rising Treasury rates TMUBMUSD10Y, +0.24% stirring interest in haven gold.
A rapid climb in rates also has coincided with weakness in the U.S. dollar, which has helped to remove a headwind for the precious commodity. Gold tends to gain when the dollar is weaker because the assets become comparatively more attractive to buyers using other monetary units. One popular measure of the buck, the ICE U.S. Dollar Index DXY, -0.08% was down 0.1% at 94.96 in Tuesday dealings. The dollar is just in the red for the month of October so far.
Recent dollar weakness has defied the stronger trend that has persisted in the buck in the year so far, a rise fueled by monetary policy tightening at the Federal Reserve. The popular U.s. index is up 3.1% so far in 2018, according to FactSet. The Fed has hiked interest rates three times this year and may do so a fourth time before year-end, which could provide some resistance to gold bulls because rising rates are likely to juice the dollar and make risk-free government bonds a more attractive investment when compared against bullion.
Minutes from the Federal Open Market Committee’s September rate-setting meeting will be released Wednesday. See the economic calendar
Overall, “rising geopolitical tensions and pessimism over the prospect of global economic growth is supporting the price of gold,” said Naeem Aslam, chief market analyst at Think Markets. “Traders are hedging their bets and rightly so. We think that the price of gold is heading towards the $1,250 mark now.”
Gold was up 3.1% so far for October, trimming its year-to-date drop to close to 5.8%, based on the most-active contracts.
Analyst Mark Hulbert, writing for MarketWatch, is skeptical that the swivel to upbeat trading in gold has legs.
“This rally began when the mood among gold market-timers was already surprisingly upbeat. According to contrarian analysis, this means that the current rally is likely to quickly fizzle,” he wrote.