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Dollar's ‘Rare Day in the Sun’ Fails to Damp Gold-Bull Spirits

  • Greenback climbs as much as 1 percent after jobs report
  • Wages climbed at the fastest pace since 2009, boosting dollar

Gold may be heading for the biggest weekly loss since December, but bulls are keeping the faith, confident that the dollar’s biggest advance in more than a year won’t last.

The greenback jumped as much as 1 percent after stronger-than-expected U.S. jobs data bolstered the case for the Federal Reserve to raise interest rates. Gold dropped after the report. While higher rates damp the appeal of non-interest bearing bullion, Tai Wong, the New York-based head of base and precious metals trading at BMO Capital Markets, is skeptical the greenback’s gains will hold.

Bullion has climbed more than 9 percent over the past year as a weaker dollar boosted demand for the metal as an alternative asset. That helped counter the headwind from three Fed rate increases in 2017. International unease over U.S. policies and uncertainty over whether the Trump administration supports a strong dollar will help limit further gains in the dollar, Wong said.

“Gold slips below $1,330 as the dollar finds a rare day in the sun,” Wong said. “Let’s see if it can close with strength. The utter inability of the dollar to maintain any meaningful rally will keep gold supported, all else being equal.”

The jobs report showed the fastest wage gains since 2009, fueling speculation that the Fed will quicken the pace of rate increases to stem inflation. The prospect of a surge in consumer prices could also prove a tailwind for gold, as it would prompt more hedge funds to use bullion as a store of value, Marwan Younes, the chief investment officer of Massar Capital Management said earlier this week.

The Fed’s preferred inflation gauge has been languishing below the central bank’s goal for most of the past six years.

Gold futures for April delivery slipped 0.7 percent to $1,338.20 an ounce at 12:40 p.m. on the Comex in New York. Spot gold fell as much as 1.6 percent to $1,327.46 an ounce. The dollar rose 0.7 percent against a basket of 10 of its major peers.

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