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Metals Stocks

May 23, 2022, 2:26 p.m. EDT

Gold books 3-day winning streak after notching first weekly gain in a month

By Joy Wiltermuth and William Watts

Gold futures closed modestly higher Monday, finding support from a pullback in the dollar and after snapping a string of four straight weekly declines.

Gold for June delivery (NYM:GC00) rose $5.70, or 0.3%, to settle at $1,847.80 an ounce on Comex, with the most-active contract touching its highest closing value since May 11, according to Dow Jones Market Data. Last week, it rose 1.7% as it bounced back from a three-month low. July silver rose 0.2% to close at $21.723 an ounce.

Gold found some support on Monday from a roughly 0.9% pullback in the U.S. dollar, (IFUS:DXY) as measured against a basket of six major rivals. A stronger dollar can be a negative for commodities priced in the unit, making them more expensive to users of other currencies.

U.S. equities also bounced to start the week, pulling the S&P 500 index (S&P:SPX) further away from a bear-market territory. The uptrend for gold, however, may be fleeting, with the yellow metal trading below its 50-day moving average of $1,914.76 an ounce, according to a team led by Tim Hayes, chief global investment strategist at Ned Davis Research.

Continued strength in the dollar could lead the team to “downgrade gold from neutral to bearish,” Hayes said, in a Sunday client note. “The dollar has been supported by three-month and 10-year yields (XTUP:BX:TMUBMUSD10Y) that are relatively high in the U.S., while most other currencies now have falling 50-day moving averages.”

Treasury yields, which move opposite to price, rose Monday, putting the 10-year rate near 2.86%, after it hit a 3 1/2-year high earlier this month. Rising yields can be a negative for gold because they raise the opportunity cost of holding nonyielding assets.

Gold last week “benefited from the combination of falling interest rates (nominal and real) and a pullback in the recently relentless dollar rally,” wrote analysts at Sevens Report Research in a Monday note. “Looking ahead, gold remains in a countertrend pullback in an otherwise upward-trending market, but we will continue to watch real rates and the dollar as key influences. If they make new highs, it will be very difficult for gold to hold above $1,800” an ounce.

In other metals trade, July copper rose 1.7% to settle at $4.3455 a pound.

July platinum rose 1% to close at $950.30 an ounce, while June palladium advanced 1.4% to end at $1,966.70 an ounce.

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