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Jan. 25, 2021, 2:19 p.m. EST

Gold down a third session as dollar firms ahead of the Fed meeting

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By Myra P. Saefong and Mark DeCambre

Gold futures ended lower Monday, down a third straight session, as government bond yields pulled back and the U.S. dollar strengthened, ahead of a Federal Reserve meeting on monetary policy later this week.

Prices for the precious metal initially climbed Monday “ahead of what is expected to be another dovish confirmation Fed policy meeting later in the week, and as Covid vaccine and lockdown news bolster the prospects of more global fiscal and monetary stimulus,” said Edward Moya, senior market analyst at Oanda, in a market update.

Ahead of the Fed’s two-day policy meeting, which concludes Wednesday, “gold should settle between the $1,850 and $1,900 range,” said Moya. 

The metal’s outlook is “still bullish mainly because of dovish commitments” from Fed Chairman Jerome Powell and Treasury Secretary nominee Janet Yellen, he said. “The next couple of weeks are big for fiscal negotiations and that should be critical for gold’s short-term outlook.” 

February gold /zigman2/quotes/210034565/delayed GC00 +0.34% fell $1, or nearly 0.1%, to settle at $1,855.20 an ounce, off the session’s low of $1,846.20. Prices put in a weekly gain of 1.4% on Friday.

Silver for March delivery /zigman2/quotes/210315219/delayed SI00 +1.36% /zigman2/quotes/211961204/delayed SIH21 +1.44% lost 7 cents, or 0.3%, at $25.484 an ounce, following a 2.8% weekly gain.

The move for gold came as the dollar another rise “following a steady stream of negative European news that sent the euro sharply lower,” said Moya. The ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY +0.10% added 0.1% to 90.36 as gold futures settled, after tapping a high at 90.519.

“The risk-off tone from equity and bond markets helped to support the dollar,” causing buck-denominated gold and silver to drop, said Fawad Razaqzada, market analyst at ThinkMarkets, in emailed commentary.

However, with Treasury yields going lower, “this has reduced some of the bearish bias on gold, which has been struggling for direction over the past few months,” he said, adding that gold “could be about to stage a rebound.”

The 10-year Treasury note BX:TMUBMUSD10Y rate was at 1.05%. Bond prices rise and yields fall. Government bonds were responding to signs of Covid fragility in Europe, with growing talk of double-dip recessions in the eurozone amid fears of longer-lasting restrictions to curb the spread of the deadly pathogen.

Falling bond yields can help lift gold prices because the commodity doesn’t offer a coupon.

Gold traders also awaited data on the health of the U.S. economy, with gross domestic product data due Thursday.

“For certain, the metal is likely to see much higher volatility during this week, and the event that is likely to influence the gold prices the most will be the US GDP number,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a daily research note.

The gold market also weighed prospects for a proposed $1.9 trillion coronavirus relief package from newly minted U.S. President Joe Biden, as well as further guidance from the Fed on its liquidity programs, which have been underpinning financial markets.

In other Comex trading, prices for March copper /zigman2/quotes/210055581/delayed HGH21 -1.25% edged up by 0.1% at $3.6295 a pound. April platinum /zigman2/quotes/216224626/delayed PLJ21 +0.90% lost 0.6% to $1,104.70 an ounce and March palladium /zigman2/quotes/215784886/delayed PAH21 -0.65% declined by 0.8% to $2,346.90 an ounce.

“Bottom line for both industrial and precious metals, as long as the longer-term downtrend in the dollar continues, and stimulus-fueled growth and inflation expectations are maintained, then metals should be able to continue their uptrends well into 2021,” said analysts in the latest Sevens Report Research newsletter.

/zigman2/quotes/210034565/delayed
US : U.S.: Nymex
$ 1,704.20
+5.70 +0.34%
Volume: 30,585
March 7, 2021 10:53p
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/zigman2/quotes/210315219/delayed
US : U.S.: Nymex
$ 25.63
+0.34 +1.36%
Volume: 13,362
March 7, 2021 10:53p
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/zigman2/quotes/211961204/delayed
US : U.S.: Nymex
$ 25.62
+0.36 +1.44%
Volume: 14.00
March 7, 2021 10:30p
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/zigman2/quotes/210598269/delayed
US : U.S.: ICE Futures U.S.
92.07
+0.09 +0.10%
Volume: 0.00
March 7, 2021 10:53p
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/zigman2/quotes/210055581/delayed
US : U.S.: Nymex
$ 4.04
-0.05 -1.25%
Volume: 9.00
March 7, 2021 10:22p
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/zigman2/quotes/216224626/delayed
US : U.S.: Nymex
$ 1,138.40
+10.10 +0.90%
Volume: 3,911
March 7, 2021 10:51p
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/zigman2/quotes/215784886/delayed
US : U.S.: Nymex
$ 2,325.70
-15.10 -0.65%
Volume: 6.00
March 5, 2021 5:06p
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