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Gold Extends Post-Fed Rally

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03/20/2017 | 08:10pm CEST
By Katherine Dunn 

Gold prices rose to a two-week high on Monday, as a weaker dollar and expectations of gradual rate increases helped extend a rally for the precious metal.

Gold for April delivery settled up 0.3% to $1,234.00 a troy ounce on the Comex division of the New York Mercantile Exchange for the third consecutive session, closing at the highest level since March 1.

Copper prices, meanwhile, wavered between gains and losses on ongoing supply concerns related to labor strikes in South America and an export license in Indonesia. Futures for May delivery settled down 0.9% at $2.6670 a pound, breaking a six-day winning streak.

On Monday, the WSJ Dollar Index, which weighs the dollar against a basket of other currencies, fell slightly to 90.51. A weaker dollar makes dollar-denominated commodities more affordable for investors who hold other currencies.

Last week's meeting by the Federal Reserve has also helped boost gold prices. While the central bank raised interest rates as expected, comments by Fed officials suggested future increases will be gradual and the tone was dovish.

Future rate increases should keep a cap on the metal's gains, and the current rally is unlikely to turn into a full bull market, said David Govett, head of precious metals at Marex Spectron. However, "being long of gold is extremely sensible at the moment with Trump in the White House and French elections looming," he said.

Copper prices wavered on profit-taking by investors, as supply disruptions to copper mines in Chile, Peru and Indonesia have dragged on. The metal has been pulled back and forth by problems at major mines as well as signs of ample supply in the market. However, despite fundamental disruptions, the macro picture and the strength of the dollar are likely to drive metals prices in the near term, J.P. Morgan said in a weekly note.

"A combination of a steady global economy and relatively stable [U.S. dollar] are supportive of industrial metals as an asset class in the near term, with fundamentals taking over increased pricing power in the second half of the year," the bank said.

--Stephanie Yang contributed to this article

Write to Katherine Dunn at Katherine.Dunn@wsj.com

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