Gold futures notched a fifth session gain and another four-month high on Wednesday, with the dollar-denominated yellow metal getting a boost as the U.S. dollar failed to see much of a bounce back from recent lows.
Prices for the yellow metal eased back a bit from the settlement shortly after the release of the Federal Reserve's Beige Book.
February gold GCG8, -0.87% rose $2.10, or nearly 0.2%, to settle at $1,339.20 an ounce-the highest since Sept. 8. Gold last week tallied a fifth week of consecutive gains, the longest such stretch since April. Month to date, the metal has climbed more than 2%. In electronic trading, prices pulled back to $1,338.10.
Among the exchange-traded funds, SPDR Gold Shares GLD, -0.81% was down 0.1% while the VanEck Vectors Gold Miners ETFGDX, -1.76% rose 0.2%.
"Currently, gold is supported by a weaker US dollar," said Chintan Karnani, chief market analyst at Insignia Consultants.
The dollar pulled back after earlier strength, with its leading index DXY, -0.08% hitting another three-year low Wednesday. The greenback has been sapped in recent sessions, in part as the euro was driven higher on expectations the European Central Bank will soon adopt a hawkish tone toward monetary policy if the eurozone economy continues to strengthen. The ECB will meet on Jan. 25.
A weaker dollar can boost the appeal of gold as an investment, as most commodities are priced in dollars. Conversely when the dollar gains, gold tends to drop.
Stock action and political rumblings could also be influencing gold action.
"Yesterday's reversal in the Dow from an opening 200 plus point gain to a negative close is also creating speculation that the equity market may be due for a reversal," said Peter Hug, global trading director, with Kitco Metals.
On Wednesday, however, the Dow Jones Industrial Average DJIA, +1.25% looked set to reclaim the 26,000 level after trading above it Tuesday for the first time ever.
Meanwhile, "government shut down worries and a growing deterioration in bipartisan cooperation on [the DACA, or 'dreamer,' immigration compromise] are suggesting that further economic reform, such as infrastructure spending, may become more difficult to achieve," said Hug.
That could provide additional safe-haven support to gold, along with negative news on cryptocurrencies.
Read: 5 key reasons bitcoin, other cryptocurrencies have lost a stunning $400 billion in 10 days
Looking at China, Karnani pointed out that the "Chinese economy is on a higher growth trajectory as compared with last year" and "a strong Chinese economy will translate into higher physical Chinese gold demand."
"I am very bullish on Chinese gold demand in their New Year," he said. Gold buying in China tends to climbs ahead of the Lunar New Year, which is set for mid-February this year.
Meanwhile, U.S. economic data showed that industrial production rose 0.9% in December-a fourth straight monthly increase, but home builder confidence has lost steam this month.
The mixed data offered few clues on the aggressiveness of Fed rate hikes this year. Gold has remained relatively strong against the backdrop of three U.S. interest-rate hikes in 2017, but could suffer if tightening continues, and especially if the pace picks up in 2018, analysts said. Gold is highly sensitive to rising rates, which increase the opportunity cost of holding nonyielding bullion. Higher rates could also lift the dollar.
On Wednesday, the Federal Reserve's Beige Book - which offers a deep dive on economic activity - said the pace of growth continues to be "modest to moderate." The report comes ahead of the Fed's next monetary policy meeting, during which the central bank is expected to keep short-term interest rates steady.
Before the Fed minutes, March silver SIH8, -0.91% fell 0.1% to settle at $17.166 an ounce, while the iShares Silver TrustSLV, -1.17% lost 0.2%. March copper HGH8, -0.03% slipped 1% at $3.189 a pound.
March palladium PAH8, -0.11% rose 2% to $1,109.70 an ounce-another record settlement. April platinum PLJ8, -0.85% added 0.6% to $1,010.90 an ounce, ending at its highest since early September.