Gold futures ended higher on Tuesday, with prices recouping their loss from a day earlier and then some, to finish at their highest in more than week, even as a rally in global stocks, an advance in Treasury yields and a firming dollar helped to limit the precious metal’s upward move.
Overall, “gold investors aren’t sure what to do right now, as reflected by prices being stuck around $1,780 for several days now,” Fawad Razaqzada, market analyst at ThinkMarkets, told MarketWatch.
“On the one hand, inflation calls for higher gold prices. On the other, rising expectations about tighter monetary conditions in the U.S., a rebounding stock market and a stronger dollar are all discouraging signs for gold investors,” he said.
“Given these conflicting macro factors, traders are probably not too keen to build bold positions in either direction until something gives,” said Razaqzada. However, “regardless of what happens in the short-term, it won’t change my longer-term view, which is that gold remains significantly undervalued.”
February gold GCG22, -0.28% GC00, -0.28% rose $5.20, or 0.3%, to settle at $1,784.70 an ounce, after losing 0.3% on Monday. The settlement was the highest for a most-active contract since Nov. 26, FactSet data show.
March silver SIH22, -0.56% SI00, -0.56% tacked on 26 cents, or 1.2%, to $22.523 an ounce after losing 1% in the previous session. Prices for the metal saw its highest finish since Nov. 30.
Recent spikes in gold and silver prices “invited a little profit-taking among existing owners,” said Adrian Ash, director of research at BullionVault, but “new buyers continue to enter the precious metals markets, taking a position in physical bullion ahead of the New Year.”
The long-term appeal of precious metals “as a portfolio and currency hedge looks solid on the financial risks building as 2022 approaches,” he told MarketWatch.
Investors are also looking ahead to the Federal Reserve meeting on monetary policy on Dec. 14 to Dec. 15.
“Whether or when the U.S. Fed finally dares to hike, interest rates will remain so far below inflation that confidence in central banks is likely to be critically weakened,” said Ash. “And while gold tends to do well when other assets do badly, it does best when faith in monetary policy evaporates.”
“While gold tends to do well when other assets do badly, it does best when faith in monetary policy evaporates.”
— Adrian Ash, BullionVault
Treasury yields across the curve were edging up, however, with the 10-year Treasury note TMUBMUSD10Y, 1.516% at around 1.467%, while the U.S. dollar was up by 0.1% at 96.422, as gauged by the ICE U.S. Dollar Index DXY, 0.07%.
Richer yields can undercut appetite for nonyielding gold and a stronger greenback can make the dollar-priced commodity more expensive to overseas buyers.
Meanwhile, equities globally climbed, diminishing some of the appeal of precious metals, amid hopes that the omicron variant of the coronavirus will prove less damaging to the economy than feared.
Commodity strategists made the case that strong demand for commodities and healthy import and export data out of China may be helping to support buying in gold and other safe-haven assets, despite the factors that would typically serve as headwinds for prices.
“A strong rally in raw commodity sector leader crude oil early this week is supporting upside price action in the metals markets,” wrote Jim Wyckoff, senior analyst at Kitco.com, in a daily note.
In other Comex dealings, March copper HGH22, 0.25% edged up by less than 0.1% to $4.34 a pound. January platinum PLF22, 0.00% added nearly 1.5% to $950 an ounce and March palladium PAH22, -1.94% settled at $1,847 an ounce, up nearly 0.1%.