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Gold Closed Up 0.1% To A Six-month High
- Dec 27, 2018 -

Gold futures closed slightly higher on Wednesday, narrowing compared with intraday gains, but still hit their highest closing price in six months, as U.S. stock markets rebounded sharply on Wednesday after the heaviest Christmas Eve sell-off in history on Monday, according to MarketWatch. But the U.S. stock market continued to fall sharply throughout December.

Gold futures for February delivery on the New York Mercantile Exchange rose $1.20 to close at $1273 an ounce, or 0.1%, hitting a high of $1282.30 an ounce, but demand for safe havens for gold weakened as the U.S. stock market rose sharply, resulting in a narrow increase in gold prices. According to FactSet, a financial information supplier, this means gold futures have reached their highest closing price since June 20 in terms of major contracts.

Spot gold prices also rose 0.8% to $1278.70 an ounce, the highest level since June 18.

Earlier this week, gold futures prices also rose, as the U.S. stock market continued to experience a sell-off since December, creating the worst safe night performance ever. In Wednesday's trading, the U.S. stock market rebounded sharply, trying to smooth out all or most of Monday's losses, but is expected to remain the worst December performance since 2008.

"The decline in global stock markets has pushed up the main support level for gold prices to $1250 an ounce. However, considering the volatility of global stock markets and the weakening of risk sentiment, it can be predicted that the market demand for gold hedge will remain strong at the end of the year and even after. Analysts at Oanda, a foreign exchange broker, wrote in a study released Wednesday.

Meanwhile, despite the rise in the dollar exchange rate, the partial closure of the U.S. government has heightened market fears that global economic growth will slow down, prompting many investors to buy gold as a safe haven.

David Song, an analyst at Daily FX, said: "An important issue that worries investors now is the sell-off of the stock market, the comments made by US President Donald Trump about the Federal Reserve, and whether the independence of the Federal Reserve is under pressure now." The Federal Reserve recently decided to raise its benchmark interest rate by 25 basis points for the fourth time this year, and Trump has repeatedly criticized the Fed's interest rate increase policy.

The Fed's interest rate hike may weaken gold's appeal to investors because gold is a non-interest-paying asset. At the same time, the Fed's interest rate hike also tends to push the dollar up. The Intercontinental Exchange (ICE) dollar index, which tracks changes in the dollar's exchange rate against six major international currencies, rose 0.54% Wednesday, limiting the rise in gold prices. Usually, a rise in the dollar would push down the prices of dollar-denominated commodity futures such as gold and crude oil, because investors in other currencies would have higher costs to buy them.

Among other metals traded on the New York Mercantile Exchange, futures silver for March delivery rose 30.3 cents to $15.123 an ounce, or 2%. Copper futures for delivery in March next year rose 3.9 cents to close at $2.70 a pound. Futures platinum prices for January delivery rose $10.70 to $799.50 per ounce, or 1.4 per cent. Palladium futures for delivery in March next year rose $9.80 to $1185.90 per ounce, or 0.8 per cent.

The market was closed on Tuesday due to the Christmas holidays, while most European markets remained closed on Wednesday and will not reopen until Thursday.