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Metals Stocks: Gold touches $1,800 for first time since mid September as dollar, yields slip

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Gold futures on Thursday were extending a rise to the highest price in a month, briefly touching the $1,800 level and heading for the sharpest weekly gain in about five months.

“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.”

In Thursday dealings, December gold
GCZ21,
+0.30%

GC00,
+0.30%

 rose $2.60, or 0.1%, $1,797.30 an ounce on Comex, with intraday high at $1,801.90, following a 2% gain on Wednesday, which sent most-active contracts to their highest settlement since Sept. 15, FactSet data show.

If the contract can close above $1,794.80, it will mark it highest close since Sept. 14. For the week, the precious metal trade up by more than 2%

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.

December silver
SIZ21,
+0.97%

SI00,
+0.97%

was up 21 cents, or 0.9%, at $23.38 an ounce after climbing 2.9% in the previous session. Prices were on track to post 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 come as the U.S. dollar and Treasury yields have 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.

Moves for precious metals may also encounter some headwinds from a rally in global stocks. The S&P 500 index
SPX,
+1.34%

and the Nasdaq Composite Index
COMP,
+1.39%

were moving higher on Thursday, signaling that investors were favoring assets perceived as risky versus those considered havens.

Relatively lower-bond yields, suggesting that borrowing costs remain subdued, were helping to buoy stocks. The 10-year Treasury note
TMUBMUSD10Y,
1.530%

yields 1.534%, versus 1.549% on Wednesday.

In other Comex trading, December copper
HGZ21,
+2.34%

climbed by 2.3% to $4.619 a pound. January platinum
PLF22,
+1.83%

added 1.6% to $1,040.70 an ounce and December palladium
PAZ21,
+2.32%

traded at $2,147 an ounce, up 1.9%.

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