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Metals Stocks: Gold settles lower after ending last week at 9-month high

Gold settled lower on Tuesday, with the market taking a breather after a three-session rally that last week lifted prices to their highest levels since April.

Price action

Gold futures for February delivery
GC00,
-0.76%

GCG23,
-0.76%

fell by $11.80, or 0.6%, to settle at $1,909.90 per ounce on Comex.

March silver 
SI00,
-1.61%

SIH23,
-1.61%

fell by 30 cents, or nearly 1.3%, to $24.068 per ounce.

Palladium for March
PAH23,
-2.59%

declined by $53.30, or 3%, to $1,734 per ounce, while April platinum
PLJ23,
-2.48%

decreased by $25.60, or 2.4%, to $1,046.90 per ounce.

March copper
HG00,
+0.30%

HGH23,
+0.30%

climbed by a penny, or 0.2%, to $4.223 per pound.

Market drivers

Gold traders are focused on Chinese gold demand for the new year, and on any potential surprises from the World Economic Forum gathering in Davos, said Chintan Karnani, director of research at Insignia Consultants in New Delhi.

Wednesday’s Bank of Japan meeting and reading on the U.S. producer-price index are also keeping precious metals traders “on the edge,” he told MarketWatch.

Gold has led a rally in precious metals as a weaker U.S. dollar has given prices a boost, while China’s economic reopening after lifting COVID restrictions has spurred hopes for rising demand.

The ICE U.S. Dollar Index
DXY,
+0.19%

was up 0.2% at 102.4077 in Tuesday dealings, but trades more than 1% lower month to date.

“Among the precious metals, gold stands out for having risen by more than 5% to reach its highest level since the end of April 2022. The other precious metals are lagging behind, however,” said a team of precious metals analysts at Commerzbank in a Tuesday note.

The Commerzbank analysts cautioned against betting that the rally in gold will “simply continue,” arguing that there’s still a “discrepancy” between the market’s interest-rate expectations and the Federal Reserve’s projections and messaging, which could make gold vulnerable to a pullback.

“Nonetheless, we would warn against assuming that the price upswing will simply continue. There is still a considerable discrepancy between the interest rate path anticipated by the market and that indicated by the Fed,” they said. “If the market changes its view and moves more into line with the Fed, the gold price risks facing serious setback potential.”

For now, Rhona O’Connell, head of market analysis, EMEA & Asia, at StoneX, thinks the gold market is “clearly overbought and ready for a correction, but underlying sentiment remains friendly.”

Whether gold has “fully priced in a slowdown in the Fed’s rate cycle is debatable, but the uncertain economic environment in Europe and the risk to emerging markets of a too strong dollar and high rates are all supportive for gold, as is the geopolitical climate,” she said in a daily note. “Silver is likely to continue to ride on gold’s coattails, having paused for a much-needed breath.”

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