Gold prices topped the closely watched $1,300-an-ounce mark on Monday, setting their sights on the highest finish in 11 months, as a key index tracking the U.S. dollar fell to its lowest level since early 2015.
Gold for December delivery GCZ7, +1.12% rose $14.40, or 1.1%, to $1,312.30 an ounce. A settlement around this level would be the highest for a most-active contract since early October, according to FactSet data.
“Expectations that the Federal Reserve will take the lead in tightening monetary policy ahead of future action by European Central Bank and/or the Bank of Japan has not helped the U.S. dollar,” said Michael Armbruster, managing partner at brokerage firm Altavest.
The greenback, as measured by the ICE U.S. Dollar Index DXY, -0.10% fell by 0.5% to 92.277, trading at its lowest level since January 2015.
The moves for gold and the greenback—which often trade inversely as changes in the U.S. unit‘s value can influence the attractiveness of gold to holders of other currencies—came on the heels of a speech by Federal Reserve Chairwoman Janet Yellen last week devoid of clues on the central bank’s near-term monetary policy intentions. Markets continue to put some odds on the chance for another rate hike yet this year but have pared back more aggressive policy expectations priced in earlier this year.
European Central Bank head Mario Draghi also showed restraint, and because he opted not to talk down the euro, it rose to a near 2 1/2-year high.
“Now that we know where both the Fed (dovish) and the ECB stands (tapering on the horizon), gold traders are going to focus on the momentum, which would primarily be driven by the dollar weakness,” said Naeem Aslam, chief market analyst with ThinkMarkets.
Nonfarm payrolls data, due for release on Friday, likely remain the key indicator for the gold market, he said, “although the geopolitics are very much playing in the background. In fact, traders aren’t going to let the recent missile test by North Korea (over the weekend) go unnoticed [and] it would provide more tailwind for the gold price.”
Gold is sensitive to rising U.S. interest rates, which increase the opportunity cost of holding nonyielding bullion. Higher rates could also boost the dollar.
Meanwhile, uncertainty surrounding the fallout from Hurricane Harvey, which is now a tropical storm, put some pressure on the dollar.
In other metals trading, the December contract for SIZ7, +1.97% the most-active contract, rose 31.8 cents, or 1.9%, to $17.45 an ounce—set for the highest finish since early June.
Copper for December HGZ7, +1.01% traded at $3.088 a pound, up 3.1 cents, or 1%. The metal logged a gain of over 3% last week on Chinese demand optimism, striking its highest level since November 2014 at one point.
October platinum PLV7, +0.92% rose $9.50, or 1%, to $988.60 an ounce, while December palladium PAZ7, +0.55% traded at $932.65 an ounce, up $6.20, or 0.7%.
As for the exchange-traded funds, the SPDR Gold Trust GLD, +1.23% ticked up 1.2%, while the iShares Silver Trust SLV, +2.01% added 1.9% and the VanEck Vectors Gold Miners ETF GDX, +2.52% gained 2.7%.