Gold prices drifted lower in holiday-thinned trade on Thursday, but losses were capped on speculation the Federal Reserve might not tighten U.S. policy as aggressively as previously thought.
Gold Prices Drift Lower in Thanksgiving Day Trade – Gold prices drifted lower in holiday-thinned trade on Thursday, but losses were capped on speculation the Federal Reserve might not tighten U.S. policy as aggressively as previously thought. The yellow metal rose 0.8% on Wednesday as the U.S. dollar fell to a four-week low after minutes from the Federal Reserve’s November meeting hinted that the central bank may not be as aggressive in raising interest rates next year as expected due to concern over the sluggish inflation outlook. That raises the question of whether the Fed will stick to three planned rate increases in 2018. The U.S. central bank is scheduled to hold its final policy meeting of the year on Dec. 12-13, with interest rate futures pricing in a 100% chance of a rate hike at that meeting, according to Investing.com’s Fed Rate Monitor Tool. For 2018, the Fed is currently forecasting three interest rate hikes, but the markets expect two at most. Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.
Crude Oil Prices Slip in Holiday Trade; WTI Holds Near 2015 High – Oil prices were a bit lower on Thursday, but still remained near their highest level in two-and-a-half years amid optimism that the crude market was well on its way towards rebalancing. Trade volumes were expected to remain light on Thursday, with U.S. markets closed for the Thanksgiving holiday. Oil prices surged on Wednesday as a drop in U.S. crude stockpiles added optimism to a rally underpinned by hopes for an OPEC deal extension. Crude oil inventories fell by 1.9 million barrels, according to the EIA, marking the first decline in three weeks. That compared with analysts’ expectations for a decline of 1.5 million barrels. Domestic stocks have dropped by 15% from their records in March, to below 2016 levels, boosting optimism that the U.S. oil market is tightening. Prices received additional support from growing signals that the Organization of Petroleum Exporting Countries (OPEC) and its allies will agree to prolong supply curbs beyond March when producers meet in Vienna next week. Top crude exporter Saudi Arabia is lobbying oil ministers to agree on a nine-month extension to OPEC-led supply cuts, sources familiar with the matter said, as Riyadh seeks to ensure a price-sapping glut is eradicated. OPEC, together with a group of non-OPEC producers led by Russia, has been restraining output since the start of this year in a bid to end a global supply overhang and prop up prices. The deal to curb output is due to expire in March 2018, but OPEC will meet on Nov. 30 to discuss the outlook for the policy.
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