Gold holds near 8-month high as traders await Fed’s Powell

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Gold futures on Tuesday gave up early gains to finish slightly lower for the first time in three sessions, a day after prices settled at their highest in eight months, as investors continued to weigh the prospects for a soft landing for the U.S. economy.

Price action

  • Gold prices for February delivery  settled at $1,876.50 per ounce on Comex, down $1.30, or nearly 0.1%, after touching a high of $1,885.20.
  • Silver prices for March delivery   fell by 21 cents, or 0.9%, to $23.665 per ounce.
  • March palladium tacked on $1.90, or 0.1%, to $1,777.30 per ounce, while platinum for April fell by $10.10, or 0.9%, to $1,088.50 per ounce.
  • Copper for March delivery added 5 cents, or 1.3%, to $4.0776 per pound, extending gains after topping $4 per pound on Monday for the first time since June.

Market drivers

“Whether slightly higher or slightly lower, the fact is that gold displayed considerable resilience,” said Peter Grant, vice president and the senior metals strategist at Zaner Metals LLC and Tornado Precious Metals Solutions.

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“Recent incoming fundamental data have suggested that the pace of inflation is slowing,” he said in his newsletter issued late Monday. “While growth is slowing as well, soft-landing scenarios seem to be gaining traction.”

Nonfarm payrolls data for December released on Friday beat expectations, but the market “latched on to slower-than-expected wage growth.” That kept yields and the dollar under pressure, buoying gold in the process, said Grant.

In prepared remarks for a panel discussion sponsored by the Swedish central bank in Stockholm, Fed Chairman Jerome Powell did not discuss the outlook for the U.S. economy or monetary policy as some had expected.

Traders await the latest reading on U.S. inflation, with the December consumer price index data due out Thursday.

Since November, a softer U.S. dollar and lower yields have helped to power the rally in gold. The yellow metal has benefited from other factors as well, including China buying gold for its reserves in December, signs of waning inflation in the U.S. and abroad, and expectations for a recession in the U.S.

The People’s Bank of China added 30 metric tons to their holdings in December, following an addition of 32 metric tons in November, according to news reports.

On Tuesday, however, Treasury yields and the U.S. dollar moved higher, putting pressure on prices for the yellow metal, precious metals analysts said.

The ICE U.S. Dollar Index a gauge of the greenback’s strength against, rose 0.2% to 103.244 on Tuesday. The index has fallen by more than 7% since Nov. 1, according to FactSet data. Meanwhile, the yield on the 10-year Treasury note rose 9.9 basis points to 3.616% in Tuesday dealings.

A stronger dollar makes gold less affordable for buyers in other currencies, while higher yields help Treasurys and other bonds to offer more attractive returns than gold, which offers no yield.

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