Gold futures notched a second straight gain on Thursday, finding support on the back of a weaker dollar even after the Federal Reserve said it expects inflation "to move up this year" in a sign it is likely to hike rates at its next meeting in March.
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Analysts said the March hike is likely widely priced in to trading.
For now, "we are not seeing any eye popping move for the gold price as investors are looking at a bigger event which is the U.S. [nonfarm payrolls] data," due Friday, said Naeem Aslam, chief market analyst at ThinkMarkets.
Still, "the stronger-than-expected U.S. ISM data pushed the gold price off its high," he said. The Institute for Supply Management said its manufacturing index in January slipped to 59.1% from 59.3% in December. Economists polled by MarketWatch expected a reading of 58.6%.
April gold GCJ8, -0.94% the most-active futures contract, settled at $1,347.90 an ounce, up $4.80, or nearly 0.4%. It had traded at highs above $1,350.
March silver SIH8, -3.50% bucked the trend to finish down 8.6 cents, or 0.5%, at $17.155 an ounce. The exchange-traded SPDR Gold Shares GLD, -1.31% traded nearly flat, while the silver-focused iShares Silver Trust SLV, -3.63%lost 0.5%.
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The dollar failed to shake off its recent weakness, with the ICE index trading at three-year lows. The ICE U.S. Dollar Index DXY, +0.61% fell 0.5% to 88.728, adding to a small loss from Wednesday when the benchmark logged its biggest one-month loss since March 2016. Dollar-priced gold often moves inversely to the buck.
Edward Meir, an independent commodity consultant at INTL FCStone, said he remains "somewhat friendly" to gold in the short term, with the dollar seemingly "adrift as investors are unsure what direction to push it." The leading dollar index trades 0.3% lower week to date.
Still, gold's performance has been rather impressive given that its recent "advance coincided with a Fed policy statement that came across as somewhat more hawkish than expected," he said. The Fed's definitive view on inflation was "enough to provide an upside jolt to gold as the central bank also prepared the markets (as expected) for a March rate increase."
Rising Fed rates, and subsequently, rising yields, can also be seen as a negative for gold, in part because the commodity offers no yield and because rising yields can contribute to a stronger dollar.
U.S. yields continued higher on Thursday, with the rate on the 10-year benchmark noteTMUBMUSD10Y, +0.00% hitting a high above 2.75%- the highest since April 2014.
In other metals action, March copper HGH8, -0.86% rose 0.4% to $3.209 a pound and April platinum PLJ8, -1.18% tacked on nearly 0.4% to $1,007.80 an ounce. Palladium's March contract PAH8, +1.79% rose 0.1% at $1,024.70 an ounce, after five losing sessions in a row.
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