Gold futures posted a slight gain on Monday, shaking off early losses to mark another finish at their highest since April.
Price action
- Gold for February delivery GC00, +0.05% GCG23, +0.05% inched up by 40 cents, or 0.02%, to settle at $1,928.60 per ounce on Comex after trading as low as $1,912.50. Prices based on the most-active contract settled at their highest since April 22 for a third consecutive session, FactSet data show.
- Silver for March delivery SI00, -1.78% SIH23, -1.78% declined by 38 cents, or 1.6%, to $23.554 per ounce.
- April platinum PLJ23, +0.76% climbed by $8.50, or 0.8%, to $1,056.30 per ounce, while March palladium PAH23, -1.17% fell by $21.80, or 1.3%, to $1,701.40 per ounce.
- Copper for March HGH23, +0.02% settled at $4.2565 per pound, up 0.1%.
Market drivers
“For now, gold seems to be able to brush off any bearish factors, such as the risk of recession fading a little and a more optimistic tone on stock markets, and has built up sufficient support to keep it close to its highest level since April,” said Rupert Rowling, market analyst at Kinesis Money.
However, “a lot of this is down to a perception” of what the Federal Reserve will do, he said in a daily note. “If the Fed doesn’t conform to expectations, then the gold price could be in for a sharp shock.”
Gold prices on Monday spent part of the session trading lower, with the U.S. dollar moving up after losses last week, and Treasury yields strengthening. Gold, as well as silver, can be sensitive to moves in the dollar and a rise in government debt yields, which can undercut appetite for precious metals.
In Monday dealings, the ICE U.S. Dollar index DXY, +0.09% traded less than 0.1% higher shortly after gold futures settled. The yield on the 10-year Treasury TMUBMUSD10Y, 3.523% added 4.1 points to 3.525%.
After impressive recoveries in the past 2½ months, “traders are wondering whether it still make sense to keep on buying gold and silver when the Fed is still raising interest rates,” said Fawad Razaqzada, market analyst at City Index and FOREX.com, in an article Monday.
“The market has become confident that the hiking cycle will soon stop as inflationary pressures continue to wane, but the noticeable recovery in oil prices this year means there is a risk that inflation could remain stickier than expected,” he said. Also, expectations of a sharp economic slowdown have “not come to fruition yet, which further reduces the need for the Fed to apply the brakes on its hiking cycle too prematurely.”
Chintan Karnani, director of research at Insignia Consultants in New Delhi, pointed out that gold has “repeated failed attempts to break past $1,950.”
It’s “too early to say that gold and silver have formed a short term top. It is just a wait and watch,” said Karnani. “But gold will not see any large scale new investors flocking to invest in gold till there is a convincing break of $2,000.”
Looking ahead, there are no major U.S. economic data releases before Thursday with the fourth quarter GDP numbers, said Karnani. “China and Chinese optimism can drive the price of precious metals till the release of Q4 GDP numbers on Thursday,” apart from technical trading.
