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Metals Stocks: Gold prices rise to turn higher for the week after fall in consumer sentiment reading

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Gold futures traded higher on Monday, with a decline in a U.S. consumer sentiment index contributing to the metal’s rise, prompting prices to turn higher for the week.

Data released Friday showed that the University of Michigan consumer sentiment index fell to 70.2 in August, the lowest level since the height of the pandemic in April 2020, from 81.2 in July.

Following the data, the ICE U.S. Dollar Index
DXY,
-0.54%

moved down by 0.4% and U.S. Treasury yields slipped, with 10-year Treasury yields
TMUBMUSD10Y,
1.321%

at 1.325% versus 1.366% on Thursday. The moves helped to support haven demand for gold.

Gold futures had become “oversold” following sharp losses last Friday and on Monday, Brien Lundin, editor of Gold Newsletter, told MarketWatch. The rebound in prices seen since then is “largely due to investor recognition that the crash was simply short-term market manipulation and no real reflection on the supply/demand dynamics for the metal.”

But the market has also seen “growing concerns over the delta variant and the economic repercussions from its spread, as evidenced by the dramatic fall in consumer sentiment” reported Friday, said Lundin. “It’s all contributing to a general view that gold is undervalued at these levels.”

December gold
GCZ21,
+1.39%

 
GC00,
+1.39%

rose $24.10, or 1.4%, at $1,75.90 an ounce, following a 0.1% decline on Thursday. For the week, the metal is set for a rise of about 0.7%, based on the most-active contract.

Meanwhile, silver for September delivery 
SIU21,
+2.76%

traded 68.4 cents, or 3%, higher at $23.80 an ounce, following a 1.6% decline in the previous session. For the week, gold’s sister metal has lost 2.2%.

Gold has been whipsawed in recent weeks by uncertainty about the strength of the global economic rebound amid the spread of the delta variant of COVID-19 and talk of the Federal Reserve tapering its pandemic-era monetary accommodations later this year or early next year.

Most of the move higher more recently for gold this week is due to increasing inflation concerns in light of the Fed “maintaining its ultra-accommodative monetary policy in the belief current high inflation is transitory,” said Jeff Klearman, portfolio manager at GraniteShares, which offers the GraniteShares Gold Trust BAR.

“Extremely low and negative real yields, reflecting expectations of continued accommodative monetary policy, support gold prices because they eliminate the opportunity cost of holding gold while increasing gold’s safe-haven desirability due to possible upside,” he told MarketWatch.

The precious metal trade also has come against the backdrop of equity buying that has taken the Dow Jones Industrial Average
DJIA,
+0.11%

and the S&P 500
SPX,
+0.08%

to a series of record-high closes, undermining demand for safe-haven gold.

“Gold has been caught in the crossfire,” wrote Victor Argonov, senior analyst at Exante, in a Friday note. “Although the current central bank policy measures should be supporting prices, the relative strength of the dollar is applying headwinds for gold, while the rallying stock markets means haven demand for precious metal is also not as strong as last year,” the analyst wrote.

Among the other metals Friday, September copper
HGU21,
+1.07%

traded at $4.42 a pound, up 1.4% in Friday dealings, trading 1.7% higher for the week.

October platinum
PLV21,
+0.81%

rose 0.7% to $1,024.20 an ounce, on track for a weekly rise of more than 5%, while September palladium
PAU21,
+0.71%

added 1.2% to $2,656.50, with prices looking at a weekly rise of around 1%.

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