Gold Inches Higher on Light Speculative Buying

Gold inched higher on Friday under extremely thin trading conditions, but barring a spike to the upside, is in line to close lower for the seventh consecutive week. Last week, gold hit its lowest level in 10 months and has dropped over $200 in value since Donald Trump won the U.S. presidential election on November 8.

Although Trump’s plans to rebuild America through fiscal spending and tax cuts have been deemed inflationary by the markets, gold has not been able to generate any buying interest. Rising U.S. Treasury yields, a rally by the U.S. Dollar to a 14-year high and expectations of at least three rate hikes by the Fed in 2017 have been exerting pressure on the market for almost two months.

December Comex Gold is currently trading at $1134.70, up $4.00 or +0.35%.

U.S. Economic Reports

In economic news on Friday, U.S. New Home Sales rose 5.2 percent last month, more than the forecast. The raw numbers showed that 592K units were sold, up from the previous 563K and above the 575K estimate.

Revised University of Michigan Consumer Sentiment came in as expected at 98.2. This was a little better than the previous read of 98.0.

Revised University of Michigan Inflation Expectations fell slightly from 2.3% to 2.2%.

Forex

The U.S. Dollar held steady against a basket of currencies on Friday as many of the major players moved to the sidelines ahead of the long Christmas holiday weekend. The March U.S. Dollar Index is up about 5 percent since Trump’s election, primarily driven by rising U.S. Treasury yields. The futures contract is currently trading at 103.01, down 0.086 or -0.08%.

Support for the Australian Dollar continued to erode on Friday with the currency hovering slightly above its May 24 bottom at .7145. The divergence between the policies of the Reserve Bank of Australia and the U.S. Federal Reserve has been primarily responsible for the recent weakness. Traders are also worried that Standard & Poor’s may lower the credit rating of the country.

Energy

March West Texas Intermediate Crude Oil traded lower and rangebound on Friday. The market appears to be recovering from early session weakness that was fueled by expectations of higher output from Libya. Nonetheless, investors seem optimistic that the OPEC and non-OPEC members that agreed to make production cuts would be on-board when the program starts on January 1.

March Natural Gas futures rose sharply on Friday as investors priced in the strong possibility of a colder than expected January. This should lead to greater demand and another drawdown of supplies in storage.