Gold futures on Thursday posted their highest settlement for a most-active contract in more than year, buoyed in part by a weaker dollar and expectations for a fall in interest rates.
Price action
- The June gold contract GC00, -0.15% GCM23, -0.15% climbed by $13.20, or 0.7%, to settle at $1,997.70 per ounce on Comex, the highest for the June contract since Friday. However, based on the most-active contracts, prices settled at their highest since March 10, 2022, according to a Dow Jones Market Data analysis of FactSet data.
- Silver for May delivery SI00, -0.06% SIK23, -0.06% rose 52 cents, or 2.2%, to $23.989 per ounce.
- Palladium for June delivery PAM23, +1.56% increased by $26.50, or 1.8%, to $1,463.60 per ounce, while platinum for July PLK23, -0.57% climbed by $19.50, or 2%, to $996.90 per ounce.
- Copper for May delivery HGK23, -0.88% rose a fraction of a cent, or 0.1%, to $4.0915 per pound.
Market drivers
“Gold continues to find support on the dips as it remains supported by falling interest-rate expectations, a weakening U.S. dollar, some safe-haven demand, as well as strong physical demand from China,” Fawad Razaqzada, market analyst at City Index and FOREX.com, told MarketWatch. “On top of this, you have strong technical bullish momentum, which is helping to keep the downside limited for now.”
In Thursday dealings, the ICE U.S. Dollar index DXY, +0.25% was down 0.4% at 102.20, raising the appeal of dollar-denominated gold prices.
The dollar has been falling since late-September, with the most recent bounce looking more “‘dead cat’ than ‘resumption of a longer-term uptrend,” said Adam Koos, president at Libertas Wealth Management Group.
Meanwhile, interest rates have been “stalling and falling into a ‘no man’s land’ range, he said. And then there’s inflation, “which hasn’t been falling as fast…as some bearish analysts may have predicted, which is adding buying pressure to gold on a more intermediate-term basis, said Koos. Gold can act as a hedge against inflation.
Also, for the technicians out there, “we have a 10-year pattern [in prices] on the verge of an enormous breakout,” said Koos. “If gold can hold above $1,860 and climb above recent highs, we could see a pressure cooker explode in price,” while observing supply and demand, and buying power versus selling pressure.
So overall, the “orchestra” of factors, and “weight of the evidence is playing a bullish underlying tune,” and any small movement in catalysts can cause “quick, decisive moves due to nimble market participants pushing or pulling their chips on/off the table,” Koos said.
Meanwhile, the precious metal’s narrow trading range over the past few sessions is the result of traders waiting for economic-data reports, including the Federal Reserve’s preferred gauge of U.S. consumer price inflation due on Friday, analysts said.
“This is a massive week for economic data from the U.S., which has led to gold essentially trading in a holding pattern,” said Rhona O’Connell, head of market analysis for EMEA and Asia at StoneX.
The final estimate of fourth quarter 2022 U.S. gross domestic product released on Thursday, however, failed to provide much guidance for gold prices, which stayed in a tight trading range early Thursday.
The growth rate of the U.S. economy at the end of 2022 was reduced to 2.6% due to weaker consumer spending, while corporate profits posted the biggest decline in two years. Initially, the government said gross domestic product has increased at a 2.9% annual pace. The data imply that the economy was not as strong as it looked at the end of 2022.
Meanwhile, the number of Americans who applied for unemployment benefits last week rose to a three-week high of 198,000.
