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Metals Stocks: Gold futures end lower, but prices hold above $1,800 to start week

Gold futures ended lower Monday, but held their ground above the important $1,800 threshold after ending last week at their highest price in nearly four weeks.

Prices are “seesawing between economic reality and taper expectations by the Federal Reserve and other key central banks,” said Chintan Karnani, director of research at Insignia Consultants.

The “daily flip flop in price” is to one factor overriding another, as better than expected economic data lead to a correction in gold and early Federal Reserve taper expectations, but data that come in below market expectations sometimes feeds anticipation for a delay in the tapering of asset purchases, he said in a market update.

Bullion prices had taken a leg higher on Friday after Fed Chairman Jerome Powell, speaking virtually to the Jackson Hole central-bankers symposium, revealed that he supports tapering the pace of bond purchases this year, but continued to see high inflation as “transitory.” He also emphasized that the start of the tapering process wouldn’t be intended as a signal that interest-rate increases were imminent.

The speech was seen as positively supporting continued buying of precious metals. A downturn in the dollar following Powell’s remarks also added to the appeal of dollar-pegged assets, which are comparatively cheaper to overseas buyers as the U.S. dollar softens.

The dollar was little changed Monday dealings, as measured by the ICE U.S. Dollar Index
DXY,
-0.01%
.

For gold, “the fundamentals are cautiously bullish for gold as a dovish taper outlook could support a new run towards $1,900” an ounce, said analysts at Sevens Report Research, in Monday’s newsletter.

“However, the technical outlook is near term bearish given the latest drop to multi-month lows,” they said, adding that “a break above the midsummer highs around $1,835 would reverse that near-term outlook to bullish.”                      

December gold
GCZ21,
-0.38%

GC00,
-0.38%

 fell by $7.30, or 0.4%, to settle at $1,812.20 an ounce, following a weekly gain of 2% based on the most-active contract, according to FactSet data. On Friday, gold finished at the highest since Aug. 2, FactSet data show.

Meanwhile, the December silver contract
SIZ21,
-0.12%

SI00,
-0.15%
,
 which is the most active, settled 10 cents, or 0.4%, lower, at $24.01 an ounce, after futures put in a weekly gain of 4.1%, based on values for the most-active contract’s Friday settlement.

“While the consensus of last week’s Fed symposium is patience on the part of the Fed, it was also clear that inflation was showing up on the radar of more Fed officials,” said analysts at Zaner, in a daily report Monday.

Therefore, the Friday morning nonfarm payroll reading will be key input to both gold and silver prices, with expectations for the August nonfarm payroll reading calling for a gain of 665,000, which is nearly 300,000 below the July reading,” they said.

“A soft payroll reading would likely undermine the dollar, pushback tapering and in turn lift gold and silver prices further,” analysts at Zaner said.

Among other Comex traded metals, December copper
HGZ21,
+1.12%

tacked on 1% to nearly $4.38 a pound.

October platinum
PLV21,
-0.38%

shed 0.4% to $1,002.10 an ounce, but December palladium
PAZ21,
+3.44%

added almost 3% to $2,479.10 an ounce.

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