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Metals Stocks: Gold holds at a six-week best as markets await Donald Trump’s press conference

Jan 11, 2017 13:18

Gold defied a firmer dollar on Wednesday, building on the recent gains that have placed the yellow metal at six-week highs as investors awaited a morning press conference from President-elect Donald Trump.

Gold for February delivery rose $3.70, or about 0.3%, to $1,189.20 an ounce. A settlement at this level would be the highest since Nov. 28, according to FactSet data. Prices have moved as high as $1,192 so far in the trading session.

The U.S. ICE Dollar Index which tracks the currency against six rivals, rose 0.4% to 102.40, according to FactSet data.

The market moves were made in the lead-up to the president-elect's scheduled 11 a.m. ET appearance from Trump Tower in New York. Market watchers hope he'll address spending plans, tax reform or other factors that speculatively have driven stocks and the dollar higher over recent weeks, and depressed gold prices until lately.

Read: What time is Donald Trump's press conference on Wednesday?

Gold tends to fall when the dollar rises as a firmer buck makes assets priced in the currency, including most gold on the global markets, more expensive to buyers using other monetary units.

The greenback has piled on more than 5% in value over the past three months, fueled in large part by anticipation that Trump's fiscal policies could spur economic growth and stoke inflation.

"Traders will look for details [from Trump] on economic plans that has been expected to ramp up inflation and speed up the pace of Fed interest rate hikes, driving the U.S. dollar to 14-year highs. This so-called 'Trump trade' has struggled lately amid uncertainty about policy specifics," said Ilya Spivak, senior currency strategist with Daily FX.

Market interest rates reflect trader expectations for fewer rate hikes this year than what the Fed itself penciled in for its "dot plot" outlook issued at the December meeting, which produced the only the second rate hike in some 10 years.

Silver for March delivery split with gold's advance. It shed 6 cents, or 0.4%, to $16.79 an ounce.

Exchange-traded funds gained, with the SPDR Gold Trust up 0.1% premarket, while the iShares Silver Trust rose 0.1%. The VanEck Vectors Gold Miners ETF added 0.04%.

As for industrial metals, they cooled price gains after a strong start to the week. March copper fell less than 1 cent, or 0.2%, to $2.61 a pound. April platinum changed hands at $979.80 an ounce, down $3.00, or 0.3%, while March palladium fell $14.30, or 1.9%, to $751.25 an ounce.

Several reasons were cited for the recent price increase, including a Tuesday report that showed producer price inflation in China experienced the strongest increase in more than five years in December.

"A number of market participants are likely to have been positioning themselves ahead of the press conference that Donald Trump has announced...The market hopes that Trump will paint a clearer picture of his planned economic, trade and foreign policy," which could guide demand expectations for these types of metals, wrote commodities analysts led by Carsten Fritsch at Commerzbank, in a note. "Speculative financial investors on the [London Metal Exchange] began the new year in a highly optimistic mood and have left their net long positions - most of which are at a relatively high level - largely unchanged."

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