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Metals Stocks: Gold settles at highest price in nearly 2 weeks as dollar, yields retreat

A softer dollar and falling Treasury yields helped boost the price of gold to its highest settlement in nearly two weeks on Wednesday, as the yellow metal built on gains from the prior session driven by expectations for smaller interest-rate hikes by the Federal Reserve.

Price action

Gold futures for December
GCZ22,
+0.68%

delivery rose $11.20, or 0.7%, to settle at $1,669.20 per ounce on Comex, the highest finish for a most-active contract since Oct. 13, FactSet data show.

December silver futures
SIZ22,
+0.75%

added 14 cents, or 0.7%, to $19.486 an ounce.

December palladium
PAZ22,
+2.12%

gained $41.70, or 2.2%, to $1,960.50 per ounce, while January platinum
PLF23,
+4.10%

added $42.80, or nearly 4.7%, to $962.50 per ounce.

Copper futures
HGZ22,
+4.09%

for December gained 15 cents, or 4.4%, to $3.545 per pound.

What’s happening

Precious metals prices got a boost with the dollar and yields on the retreat as investors adjust their expectations to factor in the prospect of a slower pace of interest-rate hikes following the Fed’s upcoming November policy meeting.

Some very recent near-term technical developments suggest that the U.S. dollar index has “put in a major top, and the U.S. stock indexes have put in major bottoms.,” said Jim Wyckoff, senior analyst at Kitco.com, in a market commentary.

That could also mean inflation may be peaking and the Fed “may be closer to the finish line on its aggressive monetary policy tightening path,” he said. “All of the above may also mean the U.S. and/or global economy may be able to avoid a serious recession.”

These are “only extrapolations at present,” said Wyckoff, but “it appears the precious metals traders are picking up on these early chart clues, reckoning not only that the greenback may have peaked, but also that it could mean better consumer and commercial demand for the metals markets in the coming months.”

The ICE U.S. Dollar Index
DXY,
-1.09%
,
a gauge of the dollar’s strength against a basket of rivals, retreated 1.1% to 109.755, while the yield on the 10-year Treasury note
TMUBMUSD10Y,
4.033%

was off 8.3 basis points at 4.0204%.

See: U.S. dollar rally takes a breather as currency slumps versus major rivals

A weaker dollar has been “good news for bullion investors, but gains should be capped well ahead of the $1,700 level” for gold, said Edward Moya, senior market analyst at OANDA. “Treasury yields have been steadily declining and that has helped make non-interest-bearing gold look more attractive.”

Meanwhile, Jeb Handwerger, editor of newsletter service Gold Stock Trades, told MarketWatch that for more than year, he had been “expecting a pullback in precious metals, especially gold, to retrace the gains that were made from $1,200 [to] $2,100 — as the 50% retracement is around $1,650.” Gold prices trade lower for the year so far.

The Fed has been aggressively raising rates and “jawboning the financial markets” for over a year now to prevent runaway inflation,” said Handwerger.

However, the correction in gold prices could be “coming to an end as the rest of the world catches up to the Fed, and the Fed will be forced to pause or pivot” in order for the U.S. to be able to service more than $30 trillion in public debt and “prevent a global depression,” he said.

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