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Gold pauses selloff as dollar softens though pressure from stock, bitcoin gains persists

<a href="">Rachel Koning Beals</a>

ICE Dollar index slips 0.1%


Gold prices clawed up modestly Monday from the five-month lows hit Friday.

A weaker dollar helped gold, though stock gains kept a lid on the haven metal, as has continued interest in bitcoin with futures trading in the cryptocurrency just under way over the weekend.

The metal got a slight additional lift when headlines hit reporting at least one injury following an explosion at New York City’s Port Authority bus terminal. The matter appeared to be contained.

Investor attention remained fixed on the midweek Federal Reserve meeting, from which an interest-rate hike has already been widely priced in to financial markets. That looming likely hike has helped to keep nonyielding bullion’s price in check as investors show preference for yield-bearing assets. Less certain is how the Fed could approach continued rate increases—policy makers have penciled in three more next year but doubts from low inflation readings persist.

February gold (XCEC:GCG8) was up $4.20, or 0.3%, at $1,252.40 an ounce. It settled Friday at $1,248.40, the lowest since July 20, according to FactSet data. Gold was down about 2.6% for last week, for a third straight weekly loss. The SPDR Gold Trust ETF (GLD) was up 0.2% premarket after a weekly loss of 2.6%. The VanEck Vectors Gold Miners ETF (GDX) was up 0.2%. Last week, it fell 3.9%.

The ICE U.S. Dollar index (IFUS:DX-Y.NYB) fell 0.1% to 93.78. It traded around 1.1% higher for last week.

March silver (XCEC:SIH8) rose 0.4% to $15.885 an ounce. It ended around 3.5% lower last week. The iShares Silver Trust (SLV) was steady premarket.

“Speculators, having positioned themselves for a break [for gold] above $1300 per ounce, got wrong-footed on a combination of a U.S. tax deal moving closer and the stronger dollar,” said Ole Hansen, head of commodity strategy at Saxo Bank, capturing the recent decline. “The weakness and long liquidation that followed was led by silver, which already began its decline a couple of weeks back when it broke below $17/oz.”

“The fading interest could be a sign that traders in search of volatility have moved to bitcoin or other cryptocurrencies instead. It also highlights that gold’s primary source of support all year, apart from dollar weakness during the first half, has come from real money investors seeking tail-end protection against market risks elsewhere,” he said.

Cameron Winklevoss, half of the twins made famous by their role in Facebook’s(FB)  early years, told Bloomberg he believes bitcoin is a “gold disruptor” that could see 20-fold gains. Bitcoin is up some 1,600% so far this year, as measured by its trading on CoinDesk.

Winklevoss based his projection on a $6 trillion market value for gold, explaining that investors appear to be warming up to the idea that bitcoin is more portable and divisible than the precious metal. Read more on his call in the Need to Know column.

In other metals trading, March copper (XCEC:HGH8) rose less than 0.03%, to $2.9795 a pound. It settled 3.7% lower last week.

January platinum (XNYM:PLF8)rose 0.8% to $890.60 an ounce. March palladium (XNYM:PAH8) rose 0.5% to $1,001.75 an ounce.

Rachel Koning Beals is a MarketWatch news editor in Chicago.

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