Fiddich Review Centre
Gold

Gold holds near 8-month high

By Myra P. Saefong and Joseph Adinolfi

Gold prices climbed on Tuesday, looking to tally a third consecutive session gain and holding ground at its highest level in eight months, buoyed by recent weakness in the U.S. dollar and Treasury yields as investors weigh the prospects for a soft landing for the U.S. economy.

Price action

Market drivers

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

“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. Traders await the latest reading on U.S. inflation, with 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 turned higher, helping to keep a lid on gains 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 103.189 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 7.7 basis points to 3.595% 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.

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.

-Myra P. Saefong

 

(END) Dow Jones Newswires

01-10-23 1053ET

Copyright (c) 2023 Dow Jones & Company, Inc.

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