Gold eked out a gain Thursday as the dollar consolidated and investors weighed the implications of a U.S. tax overhaul that passed Congress a day earlier.
Financial markets around the globe largely put up a muted response to the passage a day earlier of U.S. tax cuts with potential benefits to company bottom lines. The long-anticipated tax change was mostly priced in.
Gold stuck to a tight trading range after an initial flurry of economic data, including a slight downward revision in the pace of third-quarter U.S. economic growth to an annual pace of 3.2% from a previous estimate of 3.3%. Separately, weekly data from the Labor Department showed the number of first-time jobless claims rose 20,000 to 245,000, the largest increase since early September.
February gold GCG8, +0.13% the most active contract on Comex, rose $1 to $1,270.60 an ounce. The SPDR Gold Trust GLD, +0.14% rose 0.1%, while the VanEck Vectors Gold Miners ETF GDX, +0.58% gained 0.7%.
The ICE Dollar Index DXY, +0.10% was little changed at 93.339. News that the Bank of Japan had left its expansionary monetary policy unchanged supported the U.S. currency versus the yen kept the dollar index in a narrow range.
Gold, which is priced in dollars, is highly sensitive to moves in its exchange rate. The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -0.02% meanwhile, slipped below 2.49%. Yields had hit their highest in nine months on Wednesday, boosted by expectations the U.S. tax overhaul could accelerate economic growth. Rising bond yields tend to lift the dollar and dull the attraction of nonyielding bullion.
Gold ended with a modest gain Wednesday, notching its fifth daily rise in six sessions, with the dollar softening as lawmakers approved a sweeping tax overhaul. The House on Wednesday passed the Republican-backed tax bill, sending the legislation to President Donald Trump for his signature and marking his administration’s first major legislative victory.
Tax changes offer a mixed bag for the metal. Some analysts have noted the increased risk of inflation, against which gold can act like a hedge, if the law supercharges the economy and forces the Fed to ramp up its rate-tightening efforts. On the other hand, tax-fueled gains in U.S. stocks and other risk-on markets had helped to drive gold to five-month lows earlier this month.
Gold has been on the rise since putting in its settlement low of the month on Dec. 12 at $1,241.70. Gold futures have climbed more than 10% for the year, a gain largely accumulated by the precious metal’s surge in the early months. In fact, data show that prices have been confined to their narrowest trading range of any quarter in a decade in the last three months of 2017. Indeed, gold is still more than 7% off its intraday high for 2017 above $1,360 set in early September.
“Despite the strength in broad equity averages, spot gold has remained resilient throughout 2017, trading largely in a $100 range (between $1,200 and $1,300), and logging a year-to-date gain of [some 9%]. By contrast, gold equities have lagged the metal as demonstrated by the 5.11% gain for gold mining equities and an actual decline of 0.29% for a junior gold mining equities. This presents an opportunity for investors,” said Shree Kargutkar, portfolio manager, at Sprott Asset Management.
“Should gold benefit in early 2018 from its traditional first quarter strength, we believe that high-quality gold miners are positioned for strong earnings performances,” Kargutkar added.
Among other metals, March silver SIH8, +0.16% fell 3 cents to $16.24 an ounce. March copper HGH8, -0.28% added 2 cents to $3.22 a pound.
January platinum PLF8, +0.03% fell $1.80 to $919.70 an ounce. March palladium PAH8, +0.28% climbed 0.5% to $1,029.65 an ounce.
Read: How palladium and lumber defied the 2017 commodity slump