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Metals Stocks: Gold holds below $1,800, suffers consecutive losses

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Gold futures remained below the key $1,800 mark on Wednesday, stretching their losses to a second consecutive session, pressured by further strength in the U.S. dollar.

“Gold, like all markets, is trading on a day-to-day basis according to how traders are interpreting the tea leaves for [Federal Reserve] monetary policy,” said Brien Lundin, editor of Gold Newsletter.

The precious metal traded a bit higher than Wednesday’s price settlement after the Federal Reserve’s Beige Book on economic conditions, released Wednesday afternoon, said that overall economic growth “downshifted slightly to a moderate pace in early July through August.”

December gold
GC00,
-0.32%

 
GCZ21,
-0.32%

fell by $5, or 0.3%, to settle at $1,793.50 an ounce. In electronic trading shortly after the Beige Book release, the contract traded at $1,794.90.

Gold prices dropped 1.9% on Tuesday — the sharpest one-day percentage drop for a most-active contract since Aug. 9, with the move pushing the contract to the lowest settlement since Aug. 26, FactSet data show.


“Gold, like all markets, is trading on a day-to-day basis according to how traders are interpreting the tea leaves for [Federal Reserve] monetary policy.”


— Brien Lundin, Gold Newsletter

Sharp gains in the dollar, expectations that central banks will taper asset purchases and gold’s “inability to break past $1,840 despite positive news [last week] in the form of lower U.S. August nonfarm payrolls” contributed to gold’s fall below the key $1,800 mark, said Chintan Karnani, director of research at Insignia Consultants.

“This has resulted in short term traders using every rise to exit the gold investments,” he told MarketWatch.

The dollar continued to strengthen, weighing on gold which is traded in the greenback. The ICE U.S. Dollar Index DXY up 0.2% at 92.65.

Trading for gold has come against the backdrop of concerns about the delta variant of the coronavirus that causes COVID-19, which has supported price moves, and uncertainty about the Fed’s monetary-policy plans, as the labor-market recovery looks uneven.

Bottom line, “the bullish case for gold is characterized by a very fragile balance between a steady but relatively slow economic recovery (data that is too hot causes hawkish money flows) and still accommodative central bank policy,” Tyler Richey, co-editor at Sevens Report Research, wrote in Wednesday’s newsletter. “So, anything that contradicts either one of those things will weigh on gold near term.”

In One Chart: Chatter about a ‘commodity supercycle’ is dying down — here’s why the debate isn’t over

Meanwhile, weakness in benchmark bond yields, which can compete for haven flows against the yellow metal, failed to provide much support for gold. The 10-year Treasury
TMUBMUSD10Y,
1.341%

was yielding 1.34%, compared with around 1.37% on Tuesday.

“Despite declines on riskier assets, gold has been unable to benefit from the current short-term ‘risk-off’ climate,” wrote Pierre Veyret, technical analyst at ActivTrades, in a Wednesday note.

“Investors may want to wait for further signs of any economic slowdown before taking the decision to increase their exposure to safe havens,” the analyst wrote.

In other metals, December silver
SIZ21,
-1.35%

SI00,
-1.35%

fell 32 cents, or 1.3%, at $24.06 an ounce, following a 1.7% drop on Tuesday.

December copper
HGZ21,
-1.05%

lost 1.1% to $4.23 a pound. October platinum
PLV21,
-2.06%

declined by 2% to $976.10 an ounce and December palladium
PAZ21,
-4.46%

settled at $2,237.30 an ounce, down 4.9%.

In One Chart: Chatter about a ‘commodity supercycle’ is dying down — here’s why the debate isn’t over

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