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#Metals Stocks: Gold prices retreat from their highest level since April

“Metals Stocks: Gold prices retreat from their highest level since April”

Gold futures retreated Monday, pressured by some early strength in the U.S. dollar and Treasury yields, after posting a fifth straight weekly gain to end last week at their highest price since April.

Price action
  • Gold for February delivery
    GC00,
    -0.33%

    GCG23,
    -0.33%
    declined by $3.10, or 0.2%, to $1,925.10 per ounce on Comex.

  • Silver for March delivery
    SI00,
    -2.53%

    SIH23,
    -2.53%
    declined by 66.5 cents, or 2.7%, to $23.27 per ounce.

  • April platinum
    PLJ23,
    +0.26%
    climbed by $1.40, or 0.1%, to $1,049.20 per ounce while March palladium
    PAH23,
    -1.09%
    fell by $3.20, or 0.3%, to $1,720 per ounce.

  • Copper for March
    HGH23,
    -0.05%
    traded at $4.2585 per pound, down nearly 0.2%.

Market drivers

After impressive recoveries in the past two and a half months, “traders are wondering whether it still make sense to keep on buying gold and silver when the [Federal Reserve] is still raising interest rates,” said Fawad Razaqzada, market analyst at City Index and FOREX.com, in an article Monday.

“The market has become confident that the hiking cycle will soon stop as inflationary pressures continue to wane, but the noticeable recovery in oil prices this year means there is a risk that inflation could remain stickier than expected,” he said. Also, expectations of a sharp economic slowdown have “not come to fruition yet, which further reduces the need for the Fed to apply the brakes on its hiking cycle too prematurely.”

In Monday dealings, strength in the U.S. dollar as well as Treasury yields weighed on prices for the precious metals. Gold and silver can be sensitive to moves in the dollar and a rise in government debt yields, which can undercut appetite for precious metals.

The ICE U.S. Dollar index
DXY,
+0.12%
was flat at about 102 after trading as high as 102.275, while the yield on the 10-year Treasury
TMUBMUSD10Y,
3.525%
added 2.8 points to 3.51%.

Chintan Karnani, director of research at Insignia Consultants in New Delhi, attributed gold’s decline to profit taking, however, after the metal’s “repeated failed attempts to break past $1,950.”

Silver also crashed after it fell below the 50-day moving average of around $23.45, he said, adding that it’s just technical trade for gold and silver.

It’s “too early to say that gold and silver have formed a short term top. It is just a wait and watch,” said Karnani. “But gold will not see any large scale new investors flocking to invest in gold till there is a convincing break of $2,000.”

Looking ahead, there are no major U.S. economic data releases before Thursday with the fourth quarter GDP numbers, said Karnani. “China and Chinese optimism can drive the price of precious metals till the release of Q4 GDP numbers on Thursday,” apart from technical trading. 

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