Gold prices edge higher as U.S. dollar slips to over 2 1/2-year low

Futures for gold on Wednesday were tilting higher in choppy early action as precious metals traded against a backdrop of a weaker U.S. dollar and buoyant benchmark government bond yields.

The competing factors for bullion—dollar weakness that has provided recent support and rising debt yields that can undercut appetite for haven metals—has gold values hemmed to a relatively tight $1,800-$1,900 range around in December.

The U.S. currency as measured by the ICE U.S. Dollar index, a gauge of the unit against a basket of a half-dozen currencies, was trading at around its lowest level since April of 2018, while the 10-year Treasury note yield was holding around 0.94%, offering some potential competition for investors seeking safe-haven assets, wrote Marios Hadjikyriacos, investment analyst at XM, in a daily note.

“Finally, gold is struggling for direction as the year concludes. The yellow metal has been caught in a crossfire between a weaker US dollar and a slight recovery in real Treasury yields lately, leaving it trapped in a narrow range between $1860 – $1905 for now,” the analyst wrote.

Against that backdrop, gold for February delivery was trading $3.80, or 0.2%, higher at $1,886.70 an ounce, following a 0.1% gain on Tuesday.

Silver futures for March delivery were trading 26 cents, or 1%, higher to trade around $26.48 an ounce, after a 1.2% gain in the prior session.

Commodity markets were little-changed after a report in U.S. trade deficit in goods showed a climb to $84.8 billion in November from $80.4 billion in the prior period. A separate report on advanced U.S. inventories showed a rise of 0.7% in retail November, while U.S. wholesale inventories dipped 0.1% on the month.

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