Gold futures marked their highest settlement in about two weeks as some softness in the dollar and a lack of any significant economic data offered the metal a lift.
February gold rose $15.60, or 1.5%, to settle at $1,080.60 an ounce. That marks gold’s highest settlement since Dec. 4, when gold prices closed at $1,084.10 an ounce.
Gold is attempting to snap a streak of consecutive weekly declines in a holiday-shortened week that closes early Thursday and is capped by Christmas, when most global markets will be closed.
Some market participants partly attributed gold’s rise Monday to so-called short selling, in which traders and other investors unwind bets that gold will sink lower in the future. Those trades also can be a part of an effort by money managers to reposition their portfolios and square their books as the year comes to an end.
“I think we’re seeing short covering rather than fresh buying,” said Ross Norman, chief executive officer London-based metals broker Sharps Pixley Ltd. He said the short-gold trade has been one of the most crowded trades as investors braced for the first interest-rate hike by the Federal Reserve in nearly a decade.
Despite the bump higher for gold, many analysts are predicting that the metal will face headwinds in the wake of the Fed’s decision last week to normalize interest-rate policy.
“We are overall bearish on gold and look for further downside towards our initial targets in the [$1,033-$1,043 an ounce] area,” said Barclays, led by research analyst Feifei Li, in a Monday note. The analysts warned that gold could dip below $1,000 an ounce in the coming weeks and months. “A move below the 1,000 psychological level would point lower towards greater targets near 946,” Barclays wrote.
One of the biggest headwinds for dollar-denominated metals Wall Street analysts have pointed out is higher interest rates, which have given the U.S. dollar a recent boost because increased rates make the buck more attractive to traders. The Fed’s move to lift rates also can diminish the luster of dollar-denominated metals like gold and lowers the opportunity cost for the commodities that don’t bear interest.
Jim Wyckoff, senior market analyst at Kitco, said the unrelenting slide in crude oil may be one of the biggest factors weighing on metals and the broader commodity complex.
“[Crude oil] has had a very negative influence on commodities,” Wyckoff said. Although Monday’s action appeared to buck that trend, with oil sliding as gold rose, the Kitco analysts said that going forward plunging crude oil could pressure assets like gold, especially since commodities are generally bought as a basket of assets rather than individually.