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Gold set for second weekly decline despite weaker equities

09-Feb-2018

COMEX gold trades in a narrow range near $1320/oz after testing the lowest level since early Jan. Gold has witnessed mixed trade so far this week but is set to end lower. Gold is trading nearly 1% lower than price since start of the week.

Gold weakened this week amid some stability in US dollar and higher bond yields. The US dollar index hit a 3-year low of 88.438 last month but has recovered since then to trade near 90.3 levels. The US dollar has benefitted from increased expectations of Fed's interest rate hike.

Fed, at its last meeting, kept interest rate unchanged however it raised prospect of inflation meeting target levels this year. This along with upbeat US non-farm payrolls data and comments from Fed officials cemented market expectations that Fed will raise interest rate in March.

Sell-off in global bond market has continued since start of the year and this has pushed yields higher. The US 10-year bond yield hit a 4-year high of 2.85% this week.

Gold however gained some support from weaker risk sentiment. US equity market has plunged nearly 10% from all-time high set in January on concerns about higher interest rates. Also weighing on market sentiments are concerns about US government shutdown.

The US government has shut down after Congress failed to pass a key budgetary measure on time. Market players are however still hopeful of a deal as the House and Senate plan votes early Friday morning.

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