Metals Stocks: Gold prices tally a fifth straight session gain

Metals Stocks: Gold prices tally a fifth straight session gain

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Gold futures finished higher on Wednesday, scoring a fifth straight session gain to mark another settlement at the highest highest level in nine months.

Price action
  • Gold prices for February
    GC00,
    +0.55%

    GCG23,
    +0.55%

    delivery rose $7.20, or 0.4%, to settle at $1,942.60 per ounce on Comex — the highest finish for a most-active contract since April 21. Prices were up a fifth consecutive session, the longest daily streak of gains since the five-session rise ended Aug. 2, according to Dow Jones Market Data.

  • Silver prices for March
    SI00,
    +1.08%

    SIH23,
    +1.08%

    delivery added 19 cents, or 0.8%, to $23.941 per ounce.

  • March palladium
    PAH23,
    -2.59%

    fell $47.60, or 2.7%, to $1,687.90 per ounce, while platinum for April
    PLJ23,
    -1.78%

    fell $20.70, or 1.9%, to $1,046.10 per ounce.

  • Copper for March
    HGH23,
    +0.19%

    delivery settled at $4.2445 per pound, down 0.1%.

Market drivers

Gold “remains supported on the view that the days of [interest] rate hikes are numbered, but given the impressive gains over [the] past two and a half months, some would argue that much of the positive news is now priced in,” said Fawad Razaqzada, market analyst at City Index and FOREX.com.

However, the precious metal has found support around $1,920, a level which had served as resistance in the past, he said in a market update. “For as long as it doesn’t break the structure of higher lows and higher highs, the path of least resistance remains to the upside and a run towards $2,000 cannot be ruled out.”

Gold trades more than 6% higher year to date, buoyed by signs of waning U.S. inflation and expectations for a recession which have allowed the U.S. dollar to slide.

“Gold’s great run was sparked by a change in sentiment in how quickly the Federal Reserve will pause its interest rate hikes and further fueled by the collapse of crypto exchange FTX, and then further supported by a weakening of the U.S. dollar,” said Rupert Rowling, market analyst at Kinesis Money, in a daily note.

“With these three factors now priced in, gold will need a fresh catalyst to push it higher than the elevated level it is already trading at,” he said.

Gold has been able to make its substantial recent gains “even though the Fed implemented another rate hike in December and is likely to do so again when it meets at the end of this month,” said Rowling. The Federal Reserve Open Market Committee will hold its next two-day monetary policy meeting on Jan. 31 to Feb. 1.

“Gold therefore is already trading at a level reflective of the Fed having stopped hiking rates rather than the current environment where the U.S. central bank has yet to reach the interest rate it feels is required to ensure stubbornly high inflation returns back towards its 2% target,” said Rowling.

For holders of gold, the concern will be that the price has “climbed too high and is at risk of a sudden downward shock if the data fails to meet expectations,” he said. This week, the U.S. will see the release fourth-quarter real gross domestic product and December durable goods orders data on Thursday and a consumer sentiment index reading on Friday.

See: U.S. economy ended 2022 on solid footing, GDP to show, but a recession may loom.

At least for now, “the U.S. economy looks to be holding up well and inflation also looks to have peaked both in the U.S. and in Europe, ensuring that gold can hold near its 9-month high,” said Rowling.  

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