Gold prices settle lower after back-to-back session gains

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Gold futures settled lower on Thursday for the first time in three sessions, with strength in the U.S. dollar pressuring prices for the precious metal, as easing worries surrounding the omicron variant of the coronavirus dulled haven demand.

Traders have not increased investments in gold given that fears surrounding the omicron variant of the coronavirus have eased, said Chintan Karnani, director of research at Insignia Consultants.

Looking ahead, before the Federal Reserve meeting on monetary policy next week, the market will see the U.S. consumer price index data for November on Friday and producer price index data Tuesday.

The inflation numbers are “key to every central bank’s policy on [the] interest rate cycle,” said Karnani, adding that the Bank of England and European Central Bank will also hold policy meetings next week.

“There is speculation that the Bank of England will snub the expected interest rate hike next week due to omicron spreading rapidly in the U.K.,” Karnani told MarketWatch. What’s next for the Fed after tapering of asset purchases and when, is also “something traders are trying to assess now.”

“Aggressive investment in gold is not seen as a result of next week’s central bank uncertainties,” he said.

February gold
GCG22,
-0.39%

GC00,
-0.39%
declined by $8.80, or 0.5%, to settle at $1,776.70 an ounce, following a gain of less than 0.1% on Wednesday. Bullion’s slight gain a day ago helped it notch its first back-to-back advance of the month, thus far.

Meanwhile, March silver
SIH22,
-1.64%
lost 42 cents, or 1.9%, to end at $22.013 an ounce, following a 0.4% decline on Wednesday.

“There is moderate price pressure on the metals coming from the key outside markets being in bearish daily postures—weaker crude oil prices and a higher U.S. dollar index,” wrote Jim Wyckoff, senior analyst at Kitco.com, in a Thursday note. 

The U.S. dollar was up 0.4% at 96.245, as measured by the ICE U.S. Dollar Index
DXY,
+0.34%,
a gauge of the buck against a half-dozen rivals.

“Judging from today’s action in precious metals, investors could indeed be discounting somewhat better U.S. inflation readings going forward,” said Edward Meir, analyst at ED&F Main Capital Markets, in a daily note.

Gold “has not done anything for much of this week,” he said. Week to date, gold prices based on the most-active contract trades around 0.4% lower.

Prices for the precious metal continued to trade lower in reaction to data early Thursday showing U.S. weekly jobless claims down 43,000 to a 52-year low of 184,000.

Meanwhile, a downgrade of China property company China Evergrande by Fitch Ratings was blamed for some of the downbeat action in financial markets, with the dollar drawing haven bids and undercutting appetite for other assets that are perceived as havens.

“The downgrade may trigger cross defaults on the developer’s $19.2 billion of dollar debt,” Kitco.com’s Wyckoff wrote.  

Evergrande has been at the center of concerns about the Chinese economy, the second largest in the world, and its overleveraged property market.

Beijing is one of the world’s biggest importers of commodities including gold; so anything that could deliver an economic hit to activity may also weigh on demand estimates for assets such as gold and silver.

In other Comex dealings, March copper
HGH22,
-1.39%
lost 1.4% to $4.333 a pound. January platinum
PLF22,
-2.22%
shed 1.9% to $937.70 an ounce and March palladium
PAH22,
-1.99%
settled at $1,813.20 an ounce, down 2.1%.

source

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