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May 16, 2022, 2:20 p.m. EDT

Gold ends higher, bouncing after 2-session skid and a brief dip below $1,800 an ounce

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By Joy Wiltermuth and William Watts

Gold futures closed modestly higher to start the week after prices briefly drifted below the $1,800 an ounce threshold.

Gold for June delivery /zigman2/quotes/210034565/delayed GC00 +1.03% rose $5.80 or 0.3%, to settle at $1,814.00 an ounce on Comex, after dipping below $1,800 in trade on Monday and Friday. The precious metal logged a 3.9% fall last week, its largest since June 18, 2021, according to Dow Jones Market Data.

July silver rose 2.6% to settle at $21.551 an ounce, with the most-active contract booking its best daily percentage gain since April 12. It fell 6.2% last week, its largest such slump since late January.

Gold “has been a victim of a strong U.S. dollar and rising bond yields, making this non-interest-bearing commodity less appealing for yield seekers. Its performance has surprised many market participants, us included,” said Fawad Razaqzada, market analyst at City Index and Forex.com, in a note.

Gold came off its session low Monday as the U.S. dollar came off early highs. The ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY -0.70% edged own 0.2% after trading near a 20-year high on Friday. A stronger dollar can be a negative for commodities priced in the unit, making them more expensive to users of other currencies.

Rising bond yields also have been a drag on gold. Treasury yields early last week traded near 3 1/2-year highs before pulling back. The benchmark 10-year Treasury rate /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -2.19% was down 5 basis points to start the week, around 2.88%, following a round of disappointing global economic data.

The New York Fed on Monday said its Empire State business conditions index, a gauge of manufacturing activity in the state,  plummeted 36.2 points to negative 11.6 in May . Economists expected the index to fall slightly to a solid 16.5 reading, according to a survey by The Wall Street Journal.

“One month doesn’t make a trend and we look for healthy manufacturing activity through the rest of the year and into 2023,” Oren Klachkin, lead U.S. economist at Oxford Economics wrote, in a Monday note.

Economic data out of China also was weak, and a forecast of growth for the eurozone was cut to 2.7% for 2022 from an earlier 4% estimate.

Gold’s recent weakness, however, still has been a surprise given persistently hot inflation readings, as well as the volatility seen in equity and crypto markets, which would have been expected to spur some haven-related demand for gold, Razaqzada said.

“Those seeking to protect their wealth being eroded by inflation must be equally surprised to see the metal trade around $1,800,” he wrote. The most-active gold contract ended trade Monday 11.1% off its one-year high of $2,040.10 set in March, according to Dow Jones Market Data.

“While fundamentally I continue to remain positive towards gold, I just need to see a technical reversal pattern to confirm that prices have bottomed out. One such scenario would be if gold reclaims the broken trend line and goes back above $1850 resistance,” he said. “But first thing is first: it will need to defend support around $1800.”

In other metals trade, July copper advanced 0.4% to close at $4.1915 a pound.

July platinum fell 0.6% to settle at $925.30 an ounce, while June palladium jumped 4.4% to end at $2,002.60 an ounce.

US : U.S.: Nymex
$ 1,978.60
+20.20 +1.03%
Volume: 183,408
June 8, 2023 3:26p
US : U.S.: ICE Futures U.S.
-0.72 -0.70%
Volume: 0.00
June 8, 2023 3:26p
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
-0.08 -2.19%
Volume: 0.00
June 8, 2023 3:36p

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