A dollar-denominated commodity, gold becomes cheaper for overseas buyers when the U.S. currency weakens. The WSJ Dollar Index, which tracks the dollar against a basket of 16 other currencies, fell 0.3% Monday. Investors were tracking the Republican tax bill’s progress in Washington, as some analysts have said they expect the dollar rising if the bill passes to weigh on gold prices.
“I’m surprised that gold is up here,” said Walter Pehowich, senior vice president at Dillon Gage Metals. “The only thing keeping gold afloat is the weaker dollar,” he said.
A relentless rally in stocks and the growing prominence of Bitcoin have also hurt gold prices recently, analysts have said.
Traders have also been monitoring central-bank signals in recent sessions because gold struggles to compete with yield-bearing assets like Treasurys when borrowing costs rise. Although the Fed raised rates last week and left its forecast for three more rate increases in 2018 unchanged, some analysts said the central bank’s statement was still cautious. Any hesitation about future rate increases amid tepid inflation could support gold prices, some said.
“It’s going to be a wait-and-see attitude, and gold is kind of happy with that,” Mr. Pehowich said.
For the year, gold prices are still up nearly 10%, though they are roughly 6.5% off their year-to-date highs from early September.
Among base metals, copper for March delivery swung between small gains and losses before closing up 0.4% at $3.1460 a pound in a ninth straight session of gains. The industrial metal sits near three-year highs, boosted by robust demand from China, the world’s largest consumer, and a favorable economic backdrop.
Some analysts have said the tax bill’s progress has again raised hopes that lawmakers could pass an infrastructure spending bill that would stoke demand for copper and other metals.
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