· Gold prices hovered near four-month highs on Wednesday as the U.S. dollar slipped against a basket of currencies.
· Spot gold was flat, last up 0.1 percent at $1,339.44 an ounce by 1:58 p.m. EST (1858 GMT). It remained close to Monday's peak of $1,344.44, its highest since Sept. 8.
· U.S. gold futures for February delivery settled up $2.10, or 0.2 percent, at $1,339.20 per ounce.
· Gold trading began on a positive note today with prices fractionally higher to trade up $2 to $3 on the day. This trend would continue for the better part of the trading session. Toward the end of the trading session, the dollar index began to strengthen and move out of negative territory.
After trading for four consecutive days of higher highs, traders have bid the precious yellow metal lower today. With the recent tailwinds provided by a weakening U.S. dollar beginning to diminish, traders began to sell into the market. Selling occurred shortly after the release of the Federal Reserve’s Beige Book. However, it has been dollar weakness which has been the primary component fueling this most recent rally in gold.
· The U.S. economy and inflation expanded at a modest-to-moderate pace from late November through the end of 2017, while wages continued to push higher, the Federal Reserve said on Wednesday.
· The incredibly powerful risk-on environment moving U.S. equities higher seems to of had only a nominal effect on gold. Today’s record high, taking the Dow Jones Industrial Average above 26,000 for the first time in history, might take some wind out of the momentum evident in the precious metal rally.
· However, at approximately 3:00 PM Eastern standard time, gold futures took a dramatic hard turn and began to trade under significant pressure. Currently, gold futures are trading in a fast market, down almost $10 on the day at $1327.30. While this recent selloff could be based on a moderately strong round of profit-taking, it is more likely that some fundamental event or data corresponds to this quick and brisk turn of events.
· Today’s intraday low falls at $1326.70, which is precisely a 23.5% Fibonacci retracement and is, on a technical basis, our first level of potential support. Below that price point is the 38.2% retracement which is at $1303.80. While bullish market sentiment still prevails, today’s decline is more profound than any of the other price declines that have been part of this current rally.
· "For the moment it looks like gold appears intent on challenging the 2017 highs around $1,357," said Daniel Ghali, commodities strategist at TD Securities in Toronto.
· Gold prices could move higher if U.S. Republicans and Democrats fail to pass a spending bill by Friday to avoid a possible government shutdown, said Mitsubishi analyst Jonathan Butler. The White House said it would support a short-term bill.
Longer-term, gold will be supported by risk that global share prices could fall from record highs and strong growth around the world could stoke inflation.
· "Concerns regarding (share price) overvaluations and the possibility of rising inflation have reignited interest in gold," Standard Chartered analysts said in a note.
Funds' bets on higher gold prices have surged, with their net long positions rising to almost 200,000 contracts from fewer than 80,000 in mid-December.
"The past three weeks have seen the fastest rise in speculative positioning in gold on record," Standard Chartered analysts said.
But the net long was still only 36 percent of total open positions and could rise further, which would help to drive prices higher, they added.
On technicals, resistance was at $1,350, Matousek added. "We’ve had this nice long run since the middle of December that was orderly. Most people will lighten up, up there, then buy back," he said.
· In other precious metals, silver dipped 0.1 percent at $17.17 an ounce while platinum rose 0.7 percent at $1,005.60 after touching its highest since Sept. 8 at $1,006.60.
· Palladium rose 2.1 percent at $1,116.47 an ounce, close to the $1,138 record high hit on Monday.
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