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Oct. 21, 2020, 2:14 p.m. EDT

Gold posts highest finish in a month as U.S. dollar slips, but risks abound

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By Myra P. Saefong and Mark DeCambre

Gold prices tallied a third straight gain on Wednesday, with prices for the precious metal marking their highest finish in over a month, as a rise in bond yields was overshadowed by weakness in the U.S. dollar.

Copper futures, meanwhile, logged another settlement at the highest since 2018 , buoyed by signs of strength in Chinese demand. On Wednesday, Reuters reported on the possibility that China will buy copper for its stockpiles ahead of a meeting of the nation’s leaders to discuss the next five-year economic plan.

Looking to gold, “concerns about a will-they, won’t they agree [to a U.S.] a stimulus deal is weighing on the U.S. dollar,” Ross Norman, chief executive officer of Metals Daily, told MarketWatch.

So “in short, gold is being seen as the go-to safe haven,” he said. “Gold has switched back to dollar watching and is currently less influenced by Treasury yields,” which were on the rise Wednesday.

The 10-year Treasury note yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y 0.00% was up nearly 1 basis point to around 0.80%, while the dollar moved down by 0.5%, as gauged by the ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY -0.23% .

Rising yields can undercut appetite for gold, which doesn’t bear a coupon, while a weakening dollar can stoke demand in dollar-pegged precious metals among buyers using alternative currencies.

December gold /zigman2/quotes/210039572/delayed GCZ20 +0.11% /zigman2/quotes/201432642/composite GOLD -0.22%  climbed $14.10, or 0.7%, to settle at $1,929.50 an ounce, following a gain of 0.2% on Wednesday. The settlement was the highest for a most-active contract since Sept. 18, according to FactSet data.

Silver for December delivery /zigman2/quotes/210319381/delayed SIZ20 +0.56% /zigman2/quotes/210315219/delayed SI00 +0.60% picked up 26 cents, or 1%, to $25.241 an ounce, adding to a similar gain from the previous session.

“Silver which is showing its mettle and giving gold the confidence to move higher,” said Norman.

Some experts, however, warn that gold is vulnerable to sharp pullbacks, amid a period of recently listless trade, leading into the presidential elections in the U.S. set for Nov. 3, and as bond yields gain more altitude.

Chintan Karnani, chief market analyst at Insignia Consultants, said a rise in Treasury prices, a firmer dollar or a selloff in industrial metals, all could ignite a sharp move in bullion and points to a number of technical levels that traders need to watch.

“What gold needs to do to rise further… gold has to trade over $1,930-$1,935 zone to rise to $1,960,” the analyst said. “Key price is $1,930… if gold does not break $1,935 by tomorrow then get ready for a move back to $1,880,” he cautioned.

Meanwhile, commodity investors have trained their attention on the presidential race between President Donald Trump and Democratic challenger Joe Biden and rising cases of the novel coronavirus throughout the globe.

“A close-fought U.S. presidential election should result in a rising gold price” as the metal benefits as a safe haven investment, Karnani told MarketWatch.

Investors are also keeping watch on protracted negotiations among U.S. lawmakers centered on providing fresh aid to American businesses and workers economically harmed by lockdowns and distancing measures instituted to curb the viral spread.

In a speech to the U.K.-based Society of Professional Economists annual conference Wednesday, Federal Reserve Governor Lael Brainard said a failure by Congress to pass another coronavirus relief measure may damage the economy. Too little support would also “lead to a slower and weaker recovery,” she said.

Gold futures, which traded at $1,928.70 in electronic trading Wednesday afternoon, showed little reaction shortly after the release of the Fed Beige Book report, which said economic growth is “slight to modest” in most parts of the U.S.

In other metals action Wednesday, December copper /zigman2/quotes/210059538/delayed HGZ20 +0.13% rose 1.6% to $3.1985 a pound, scoring another finish at its highest since June 2018.

January platinum /zigman2/quotes/214899298/delayed PLF21 +0.62% added 1.9% to $893.90 an ounce and December palladium /zigman2/quotes/214428583/delayed PAZ20 -0.15% settled at $2,427.50 an ounce, up 0.4%.

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