Gold futures inched higher Friday to finish with their best monthly gain in a year, as losses in January for most stock markets around the globe lured investors to the perceived safety of the precious metal.
But the outlook for gold was uncertain after the Bank of Japan’s decision Friday to adopt negative interest rates, considered acknowledgment of broad worries about a global economic slowdown, fueled a rally in the U.S. dollar.
April gold GCJ6, +0.21% climbed by 30 cents to settle at $1,116.40 an ounce. Prices, based on the most-active contracts, rose by roughly 5.3% for the month of January, representing its best monthly gain since January 2015, according to FactSet data. For the week, gold gained 1.8%.
A stronger dollar, as measured by the ICE U.S. Dollar Index DXY, +0.96% capped gains for gold Friday after Japan surprised markets by adopting negative interest rates on some deposits to stem deflationary fears. The dollar and gold tend to move in opposite directions because a stronger buck makes dollar-priced assets more expensive in other currencies.
Naeem Aslam, chief market analyst at AvaTrade, said the market is trading in “uncharted territory with respect to [the BOJ] negative interest rate.” The effect the BOJ stimulus effort has on restoring investors’ appetite for riskier assets will be key for the outlook on gold, he said.
Even so, Ken Ford, president at Warwick Valley Financial Advisors, said the BOJ’s move highlights turmoil in the global economy and may make it nearly impossible for the Federal Reserve, which raised interest rates in December, to continue to normalize monetary policy in the U. S.—a boon for gold and other metals, which don’t carry a yield.
“Traders are realizing what is in the future for gold and that the Fed might have screwed up [by raising rates a quarter point last month],” Ford said. He said signs are pointing to a growing recessionary environment for the U.S., which may spark appetite for gold.
However, Aslam read a report on gross domestic product, released earlier Friday, as mostly falling in line with expectations, implying less weakness in the U.S. economy than feared.
“The US GDP was the dominant affair with respect to the gold price and the number came very much in line with the expectations. So what this has confirmed is that the frailty for the US economy continues, but it is not falling off the cliff—at least not yet,” Aslam said.
Aslam said he would be looking ahead to the jobs report for January, due on Feb. 5. Economists polled by MarketWatch are expecting the U.S. to add 185,000 jobs for the month.
In other metals on Comex, March silver SIH6, +0.16% picked up 1.1 cents, or 0.1%, to end at $14.243 an ounce, for a weekly gain of 1.3% and a monthly climb of 3.5%.
High-grade copper for March delivery HGH6, +0.46% gained 1.6 cents, or 0.8%, to $2.067 a pound. It was up about 3.2% for the week, but down around 3.3% for the month.
April platinum PLJ6, +0.46% added $6.40, or 0.7%, to $874.30 an ounce, for a weekly advance of 5.1% but a monthly decline of over 2%. March palladium PAH6, +1.61% climbed $6.50, or 1.3%, to $498.50 an ounce, and saw a weekly fall of 0.3% and a monthly decline of more than 11.6%.