Gold Follows Crude Oil Prices Higher As Commodities Rebound

Gold prices inched higher on Tuesday, taking cues from a rebound in crude oil prices and other commodities as a weaker dollar gave the raw materials sector a much needed respite.

The most actively traded contract, for December delivery, was recently up $1.20, or 0.1%, at $1,090.60 a troy ounce on the Comex division of the New York Mercantile Exchange.

Gold prices have been hovering at five-year lows as investors sold the precious metal in preparation for a potential increase in U.S. interest rates. The Federal Reserve is widely expected to increase borrowing costs before the year is out, ending a historic period of near-zero interest rates. Like other commodities, gold doesn’t pay interest and costs money to store. This will make it harder for the precious metal to compete with interest-bearing assets like Treasury bonds once the U.S. central bank tightens monetary policy.

On Tuesday, a rebound in crude oil prices sparked a turnaround in other commodities, including gold. U.S. benchmark oil prices for September delivery were recently up 1.5% at $45.85 a barrel. Copper prices rose 0.9% to $2.3665 a pound, recovering from six-year lows.

“You can’t go down every day,” said Bill O’Neill, co-founder of commodities investment company Logic Advisors. Still, he said gold is likely to continue moving lower in weeks to come as demand for the precious metal remains absent. “there’s nothing here that tells me the trend has changed,” he said.

A weaker dollar also lent gold prices some support. The Wall Street Journal Dollar Index was recently down 0.2% at 88.65.

Gold is priced in the U.S. currency, and when the dollar weakens the metal is less expensive to buyers who use stronger currencies to fund their gold purchases.

Meanwhile, platinum plunged to a 6 1/2-year low, while palladium fell to a 2 1/2 -year low amid continued jitters about demand from China. The losses came despite strong U.S. car sales data, and point to traders concerns that the world’s largest car market–China–is slowing alongside the country’s broader economy. Both platinum and palladium are widely used in car exhaust filters.

Nymex October platinum traded down 1.1% at $956.20 a troy ounce, while palladium for September delivery is down 1.1% at $596.30 an ounce.

“Palladium continues to float right below the 600 mark making people wonder how this metal lost so much of its luster. It’s quite possible that this is a bargain but even consumers have not been coming out to buy the metal,” said Miguel Perez-Santalla, sales and marketing manager with Heraeus Metals New York LLC, in a note to clients.

Write to Tatyana Shumsky at tatyana.shumsky@wsj.com

(END) Dow Jones Newswires

August 04, 2015 10:51 ET (14:51 GMT)

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