By Myra P. Saefong and Mark DeCambre
Gold futures on Thursday stretched their gains into a third consecutive session to settle at the highest highest price in a month, with analysts attributing the metal’s strength to concerns about inflation.
“Gold and silver roared back alive this week and it is showing how oversold and appealing it is to buyers on pullbacks, with growing inflation concerns globally and deep negative real yields,” Peter Spina, president and chief executive officer at GoldSeek.com, told MarketWatch.
“Physical demand remains strong out of the key buying centers and inflation fears will keep the price well supported,” he said. The price is trying to break above the $1,805/$1,806 resistance area next, which are 100- and 200-day moving averages, and “a move above can excite the market further.”
On Thursday, December gold /zigman2/quotes/210039437/delayed GCZ21 +0.84% /zigman2/quotes/210034565/delayed GC00 +0.87% rose $3.20, or 0.2%, to settle at $1,797.90 an ounce on Comex, with intraday high at $1,801.90, following a 2% gain on Wednesday. Prices for the most-active contract settled at the highest since Sept. 14, FactSet data show.
Gold, which has historically been seen as a hedge against inflation, got a boost Wednesday after a U.S. consumer-price index reading showed a climb of 0.4% in September. Data Thursday showed the U.S. producer price index jumped 0.5% last month.
“Gold has also been supported because of inflation,” said Fawad Razaqzada, market analyst at ThinkMarkets. “Some investors view the metal as a means of hedging against rising prices eroding the value of fiat currencies,” he said in a market update. “Yet, higher inflation calls for tighter monetary policy, which should mean higher yields — and higher yields [are] normally bad news for gold. So, the metal remains stuck between a rock and a hard place, despite its impressive comeback.”
December silver /zigman2/quotes/210319421/delayed SIZ21 +0.94% /zigman2/quotes/210315219/delayed SI00 +0.90% gained 31 cents, or 1.3 %, at $23.477 an ounce after climbing 2.9% in the previous session. Prices registered another finish at the highest since Sept. 15.
“The waterboarding maybe over for gold-silver bugs, but the rocket ship past the gravitational pull of the Earth is going to take much more energy,” said Spina. “Patience will reward those who do not allow the emotions of the markets dictate their perspectives.”
“Gold and silver have so many fundamental drivers behind it. It will get its next ride higher to new heights, even if it’s not likely this year,” he said. “Accumulation time on pullbacks. The market is setting itself up for new record highs, but it may take another [six to 12] months to get going.”
Gains in bullion and other precious metals Thursday came as the U.S. dollar and Treasury yields staged a modest pullback. However, some analysts believe that gold’s ascent will be capped by the likelihood that Treasury yields will eventually resume their climb as the Federal Reserve kicks off its tapering of monthly purchases of government debt and mortgage-backed securities before year-end.
Although the yellow metal has moved up, the “momentum is insufficient to achieve significant gains as Treasury yields continue to surge as investors expect tapering to begin in 2021,” wrote Naeem Aslam, chief market analyst at Oanda Corp. in a daily research note.
On Wednesday, minutes from the Federal Reserve’s most recent policy gathering in September confirmed that central-bank officials discussed a plan to reduce the pace of asset purchases by $15 billion a month and are considering launching reductions next month or the following.
The Fed’s No. 2 Richard Clarida had already signaled earlier this week that the economic recovery from COVID-19 had essentially met the criteria necessary to announce a reduction of monthly asset-purchases of Treasurys and mortgage-backed securities that have been in force since June of 2020.
Tapering of the Fed’s asset purchases, and the eventual conclusion of such buys in the middle of 2022, is expected to lift bond yields, making government debt more competitive compared against precious metals that don’t offer a coupon.
For now, the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +1.70% weakened, with yields at 1.518%, versus 1.549% on Wednesday.
In other Comex trading, December copper /zigman2/quotes/210059552/delayed HGZ21 +1.31% climbed by 2.6% to $4.632 a pound, the highest finish since since June 1.
Prices for the industrial metal have climbed on concerns over shortages in supply at from energy-intensive metals producers, said Michael Hewson, chief market analyst at CMC Markets UK, in a market update.
January platinum /zigman2/quotes/222209103/delayed PLF22 +2.52% also added 2.7% to $1,052.30 an ounce and December palladium /zigman2/quotes/221433715/delayed PAZ21 -0.07% settled at $2,150.90 an ounce, up 2.1%.
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