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Metals Stocks: Gold climbs toward key resistance at $1,900 on drop in U.S. consumer confidence

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Gold futures moved higher Tuesday to make a play for $1,900 an ounce, a key price resistance level, as data show monthly declines in U.S. consumer confidence and new home sales, boosting the precious metal’s appeal as a haven investment.

Gold have been trading mostly flat over the last couple of sessions, “awaiting some new impetus for price movement,” said Brien Lundin, editor of Gold Newsletter. “That came with the disappointing consumer confidence and home sales data, which added to the evidence that the [Federal Reserve] is a long way from thinking about tightening monetary policy.”

U.S. consumer confidence survey slipped to 117.2 in May from a revised 117.5 in the prior month, according to the Conference Board Tuesday. The index was forecast to decline slightly to 119.5 based on a survey of economists compiled by Dow Jones and The Wall Street Journal.

New home sales, meanwhile, fell by nearly 6% in April to 863,000 annual rate, Census Bureau said. The median forecast of economists polled by MarketWatch was 959,000.

However, the S&P CoreLogic Case-Shiller national house price index showed a rise of 13.2% in the year to March for existing homes, the highest annual gain since December 2005.

Before big economic number releases like these, “people get out off products or investments and react to news,” said James Hatzigiannis, chief market strategist at Ploutus Capital Advisors. So the gold market saw a “combination of accelerated losses in the U.S. dollar and [Treasury] yields,” with investors moving from “one safe-haven to the more attractive safe-haven.” 

Against that backdrop, June gold
GCM21,
+0.41%

GC00,
+0.41%

was up $7.80, or 0.4%, at $1,892.30 an ounce after trading as high as $1,896.80. Prices had been trading mostly lower before the economic data, marking an intraday low at $1,873.20. They rose 0.4% on Monday to post the highest most-active contract settlement since Jan. 7, FactSet data show.

July silver
SIN21,
+0.38%

SI00,
+0.38%
,
meanwhile, was up 8.5 cents, or 0.3%, at $27.99 an ounce, after rising 1.5% on Monday.

“We are bullish on gold and silver as we see the economy starting to open up and money flowing out of cryptos into more safe-haven plays like gold and silver,” Hatzigiannis told MarketWatch, adding that gold may soon top $1,900 as gold prices “have been holding up even with the threats of China to deflate prices.”

 Read: China announces ‘zero tolerance’ crackdown on commodity-market speculators

“With the economy almost at full capacity, we believe that will spike the classic demand back into gold and silver,” said Hatzigiannis. “Combined with lower yields and a decline in the dollar, gold and silver are sitting pretty, and it would take an unprecedented news headline for gold to break to the downside here.”

“I see strong holders in this area and more big money flowing into these two commodities,” he said. “We like the technicals and the fundamentals are finally starting to favor gold and silver.” 

In Tuesday dealings, the dollar, as measured by the ICE U.S. Dollar Index 
DXY,
-0.04%
,
was little changed after falling to a low at 89.535. A weaker dollar can make assets priced in the currency more attractive to overseas buyers.

The 10-year Treasury yield 
TMUBMUSD10Y,
1.579%

was around 1.577%, near the lowest level for the benchmark bond since early May. Falling yields can benefit precious metals and other commodities, which don’t offer a coupon, by reducing the opportunity cost of holding them against yield-bearing assets.

“At the end of the day, gold is reacting to easing Treasury yields,” Michael Armbruster, managing partner at Altavest, told MarketWatch. “Thanks to surging inflation and wildly dovish Fed policy, real yields have been plunging.”

“The question for gold traders is how long nominal Treasury yields will ignore spiking inflation data,” he said. “We think there is a good chance that nominal yields will play catch-up (rise) in the weeks ahead and that is a risk factor for gold in the short-run.”

Among other metals, July copper
HGN21,
-0.43%

fell nearly 0.5% to $4.51 a pound. July platinum
PLN21,
+1.51%

tacked on 1.5% to $1,195.40 an ounce and June palladium
PAM21,
+1.44%

rose 1.4% to $2,767.50 an ounce. September palladium
PAU21,
+1.43%
,
which also among the most active, traded at $2,776.50 an ounce, up 1.4%.

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