Gold Heads Higher as Trading Resumes After CME Outage Headache
Spot bullion whipsawed earlier Friday, with the market also seeing a brief surge in bid-ask spreads.
Gold traders faced a volatile session Friday as an earlier technical outage on the Chicago Mercantile Exchange disrupted markets, bringing another headache weeks after the longest-ever US government shutdown ended.
US futures trading resumed, following hours of disruption that hit trading across markets including gold futures and options on the Comex, which are often used to hedge exposure to prices in London. A lack of live trading or pricing for those contacts can make it harder to trade as they diverge from spot prices in London, the dominant trading hub.
Spot bullion whipsawed earlier Friday, with the market also seeing a brief surge in bid-ask spreads. CME gradually restored operations. US copper futures also resumed trading, after earlier being affected.
The outage comes after traders had also recently faced the challenge of the US government shutdown, which had affected the release of economic data that markets use to gauge the outlook for US interest rates. With Comex contracts affected, some traders said they reverted to old-school methods of calling brokers and dealers by phone on Friday in order to hedge their exposures.
“Spot and futures market goes hand-in-hand, as bullion traders use the futures to offset or hedge activity in the spot market,” said Saxo Bank A/S strategist Ole Hansen. “When that leg goes dark, the spot market suffers as well through higher spreads and lower activity, obviously not helped by the fact this was going to be a quiet day anyway, with the long Thanksgiving weekend in the US.”
Meanwhile, bullion is still up about 3% this week, and on track for its fourth monthly gain after hitting a record high in October. A series of comments by Federal Reserve officials and the release of delayed economic data have supported the case for lower borrowing costs, which typically benefit gold as it doesn’t pay interest.
Traders have digested every last clue for the next US rate decision. There’s limited news expected on Friday with no economic data scheduled for release in the US, and no expected Fed speakers ahead of a blackout period leading up to their anticipated December decision. Following the recent government shutdown, some statistics will not be released at all, making it challenging for the Fed and investors to assess the state of the world’s largest economy.
Bullion is on track for its best annual performance since 1979. Elevated central-bank buying as well as robust inflows to exchange-traded funds supported the metal’s run to a record above $4,380 last month. Investors have piled into alternative assets in a wider retreat from government bonds and currencies.
Gold added 0.7% to $4,188.37 an ounce by 2:08 p.m. in London. The Bloomberg Dollar Spot Index was steady. Platinum gained 2% and palladium rose 0.7% as both whipsawed, impacted by lower liquidity. Spot silver touched a new record high, supported by ongoing supply tightness.
Comex copper was up 1.1%.
