Metals Stocks: Gold futures climb a day after settling at a roughly 6-month low

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Gold futures climbed on Thursday, aiming to snap a two-session skid that pulled the metal to its lowest settlement in about six months, but strength in the U.S. dollar and Treasury yields have set prices up to post losses for the month, as well as the quarter.

“Gold has lost a lot of friends this month,” Ross Norman, chief executive officer at Metals Daily, told MarketWatch. Still, “on paper it has much going for it: incipient inflation, a stagnating economic recovery and equities valuations at nose-bleed levels. Then there’s the debt ceiling and an emerging energy crisis.”

Despite all this, most-active gold futures trade more than 4% lower for the month, which would be its sharpest monthly decline since June, and down about 1.6% for the quarter, according to FactSet data.

“Gold has not been helped of course by U.S. dollar strength, which has risen by 5% YTD, nor real Treasury yields which have become significantly less negative,” said Norman. 

December gold GCZ21 was trading $20.90, or 1.2%, higher at $1,743.80 an ounce, following a 0.8% decline for the precious metal on Wednesday that took it to the lowest most-active contract settlement since March 31, FactSet data show.

The U.S. dollar was little changed on the session, but up 1.1% on the week, headed for its sharpest weekly gain since June, as measured by the ICE U.S. Dollar Index DXY, while the 10-year Treasury yields BX:TMUBMUSD10Y fell to 1.537% from 1.54% on Wednesday, but trades higher for the week. A stronger dollar can make assets priced in the currency comparatively more expensive to overseas buyers and rising yields can make the precious metals, which don’t offer a coupon less attractive than bonds.

Gold bulls point to intensifying worries about inflation, concerns about China’s economic recovery and a White House at loggerheads over the U.S. debt ceiling as factors that should be delivering more of a jolt to bullion.

However, the rise in the U.S. dollar to around the highest levels since last fall, gains in bond yields as inflation anxieties percolate, and increasing anxieties about the tapering of the Federal Reserve’s market-supportive asset purchases are all combining to buffet precious metals.

“The precious metal remains under pressure from a strengthening U.S. dollar, as earlier than expected tapering by the Fed and rising Treasury yields, as well as the greenback’s own refuge asset appeal, are likely to create more upside for the American currency,” wrote Ricardo Evangelista, senior analyst at ActivTrades in a research note.  

December silver SIZ21, meanwhile, was up 45 cents, or 2.1%, at $21.94 an ounce, following a 4.4% tumble on Wednesday, pushing gold’s sister metal to the lowest settlement since July 2020.

For the month, silver is set for a decline of over 8%, which would be its steepest monthly fall since September of 2020, contributing to a quarterly drop of over 16%, marking its most severe quarterly decline since the first quarter of 2020.

Another factor likely to provide some headwinds for gold was bad data out of the world’s second-largest economy in the world. China’s manufacturing purchasing managers index fell to 49.6 in September, the National Bureau of Statistics in Beijing said Thursday, marking its first drop in activity, a reading of at least 50 indicates expansion, since February.

Weakness in China can weigh on gold, and other commodities, because the country is one of the largest buyers of precious metals.

Gold prices, meanwhile, extended their rise after data Thursday showed Chicago Business Barometer, also known as the Chicago PMI, slowed to 64.7 in September from 66.8 in the prior month.

“Pushed into the market, we think the prevailing track is down for the precious metals and may remain down until a positive buzz from global growth expectations returns and inflationary views are revived,” said analysts at Zaner, in a daily market update.

Also on Comex Thursday, December copper HGZ21 lost 3.1% to $4.069 a pound, poised for a monthly loss of nearly 7% and a decline of about 5% for the quarter.

January platinum PLF22 was up 2.1% to $967.30 an ounce, down nearly 5% for the month and set to lose almost 10% for the quarter. December palladium PAZ21 traded at $1,890 an ounce, up 3.3% for the session, with prices down over 23% for the month and down 32% for the quarter.

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