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Metals Stocks: Gold futures post back-to-back gains, supported by rising inflation

Gold futures moved higher for a second day Wednesday, as support from concerns over a rise in inflation outweighed pressure from strength in U.S. Treasury yields.

For now, “we see investors are more interested in gold price because they believe that inflation is likely to remain anchored for some time,” Naeem Aslam, chief market analyst at AvaTrade, told MarketWatch. “Gold is a decent hedge against inflation hence we see the gold price in demand.”

“In relation to the gold price, the most important thing for investors is the upcoming manufacturing PMI data which will be coming on Friday,” he said.

Investors will be eyeing a number of speeches from a Federal Reserve members this week, including Chicago Fed President Charles Evans, St. Louis Fed President James Bullard, Atlanta Fed President Raphael Bostic and Fed President Neel Kashkari who will speak at a Fed conference on Racism and the Economy at noon Eastern time Wednesday.

Also, the Fed Beige Book on current economic conditions will be released shortly after gold futures settle for the session.

December gold
GCZ21,
+0.92%

 
GC00,
+0.92%

climbed by $9.30, or 0.5%, to reach $1,779.80 an ounce, after rising 0.3% on Tuesday. Prices based on the most-active contract are poised to settle at their highest since Oct. 14, FactSet data show.

The yellow metal has gotten some traction this week as the dollar has softened, with the ICE U.S. Dollar Index
DXY,
-0.18%
,
down 0.2% so far this week, while gold was headed for a weekly advance of 0.7%.

A weaker dollar can make assets priced in the currency more attractive for buyers using other currencies. Lackluster U.S. housing data on Tuesday was blamed for contributing to weakness in the greenback a day ago.

December silver
SIZ21,
+2.35%

climbed along with gold, edging up by 20.2 cents, or 0.9% to $24.085 an ounce.

Analysts are expecting gold to eventually face stiffening headwinds from the Federal Reserve if the central bank is compelled to lift benchmark interest rates faster than had been previously anticipated to cool a rise in inflation.

“Much has been said about the concerns over high inflation and how, in such a scenario, the tightening of policies by the Federal Reserve is likely to support the dollar and, due to the inverted correlation between the two assets, generate weakness for the precious metal,” write Ricardo Evangelista, senior analyst at ActivTrade, in a Wednesday note.

Worries about a quicker pace of interest rate increases, with expectations growing that the Fed will commence a rollback of its COVID-era asset purchases has pushed the 10-year Treasury note
TMUBMUSD10Y,
1.640%

to its highest rate in about five months.  

Among other metals traded on Comex, December copper
HGZ21,
+0.86%

lost 0.2% to $4.694 a pound. January platinum
PLF22,
+0.86%

tacked on 0.2% to $1,048.70 an ounce, but December palladium
PAZ21,
-1.30%

traded at $2,064 an ounce, down 1.8%.

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