Gold consolidates, OPEC deal may aid prices

Gold was consolidating on Thursday morning in London, rebounding off Wednesday’s weekly low below $1,320.

– The spot gold price was last at $1,321.65/1,322.05 per ounce, little changed from the previous close. Trade has ranged from $1,320.35 to $1,325.88 so far.

– “Gold is consolidating because of a reduced safe-haven bid in a risk-on environment and Fed hawkishness, which is pushing the dollar and US real rates higher,” FastMarkets analyst Boris Mikanikrezai said. “At the same time, the technical picture remains healthy, with prices above the 100 and 200 DMAs. So we are willing to keep our constructive view intact. But a sudden break below the 100 DMA and, more importantly, $1,300 would force us to reassess.”

– As well, stronger oil prices are providing support. Crude oil prices surged to three-week highs following reports that OPEC members have reached an initial deal to cut oil output – spot Brent crude  price reached $49.07 per barrel.

– “Oil and gold tend to be positively correlated and while the two generally move in sync the relationship is stronger at some times than at others,” HSBC’s James Steel said. “The early reports of an OPEC agreement to limit oil output, if it drives oil up further in the coming days, may have a more marked impact on gold.”

– Last night, Federal Reserve chair Janet Yellen’s remarks on monetary policy outlook during her testimony at the Committee on Financial Services were in line with the Federal Open Market Committee’s message in September.

– While the Fed has not given a fixed timetable for rate rises, most FOMC members expect a move this year, ANZ Research said. “The market will not move to seriously price that possibility in until the US election [on November 8] is out of the way,” the bank said.

– In the other precious metals, silver was little changed at $19.120/19.140 per ounce. Platinum at $1,023/1,033 was up $2 and palladium edged $1.50 higher to $708/713.

(Editing by Mark Shaw)

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