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Metals Stocks: Gold ends at a more-than-2-month high after a third straight gain

Gold futures climbed Monday, with prices stretching their streak of gains to a third consecutive session to mark another finish at the highest since early September.

If prices for gold were going to drop, “they should have done so after the [Federal Open Market Committee] decision” last Wednesday, said Fawad Razaqzada, market analyst at ThinkMarkets. “Instead, they rallied into the close of the week, and look poised to make further gains — especially if the upcoming speeches by central bank officials continue to suggest monetary policy will not be tightened aggressively and that inflation is going to be transitory.”

Last week, the Bank of England was “doing the talking but failing to walk the walk as they refused to hike rates…despite indicating previously that they were likely to do so,” he said in note Monday. “On top of this, dovish rhetoric from the European Central Bank continued.”

Furthermore, the Fed’s decision Wednesday to taper its bond-buying program by $15 billion was “fully priced in, and presumably so too were the downside risks to gold and silver,” said Razaqzada.

“With several central bank officials speaking this week, let’s see if we will continue to hear more dovish rhetoric,” he said. If so, “this should be good news for stocks and gold, or risk assets in general. The big risk is if we see massive spike in U.S. CPI inflation — unlikely, but not totally out of question.”

Gold for December delivery
GCZ21,
+0.59%

GC00,
+0.59%

 rose $11.20, or 0.6%, to settle at $1,828 an ounce, following a 1.8% weekly gain. Prices based on the most-active contract marked a second-straight finish at the highest since Sept. 3, as well as a third session gain in a row, FactSet data show.

Read: Why gold has climbed in the wake of the Fed’s decision, but still trades lower for the year

The “aftershocks of last week’s unexpectedly dovish tilt from central banks has continued to push prices higher,” said Michael Hewson, chief market analyst at CMC Markets UK, in a note.

Gold continued to trade higher Monday as a pair of senior U.S. Fed officials indicated that the central bank may raise interest rates by the end of 2022, based on the rapid recovery of the economic and an extended bout of high inflation.

Fed Vice Chairman Richard Clarida on Monday repeated his view that the criteria for a rate hike could be met before the end of 2022, while St. Louis Fed Bank President James Bullard said in an interview with Fox Business that he expects the central bank to raise interest rates twice in 2022.

The Fed last week noted that it was prepared to make adjustments in the pace of its bond-buying program if “warranted by changes in the economic outlook,” raising some expectations that the central bank could lift rates at an accelerated pace if needed.

“Bullion has essentially turned into a trade on how quickly the Fed will pull the rate hike trigger, benefiting every time normalization expectations are pushed back and suffering each time they are brought forward,” wrote Marios Hadjikyriacos, senior investment analyst at XM.com, in a daily note.

Read: Why markets are like a duck: ‘calm above the surface, but furious churning below’

Gold tends to be viewed as a hedge against inflation, which has been on the rise in the recovery phase of the COVID-19 pandemic.

A retreat in yields last week, which dragged down the yield for the benchmark 10-year Treasury note
TMUBMUSD10Y,
1.489%
,
used to price everything from mortgages to car loans, registered its steepest weekly fall since June 12, 2020, helping to pave the way for higher moves for bullion and other nonyielding precious metals.

The next key resistance for gold prices is the midsummer high of $1,835, which has been a solid barrier since mid-July, CMC Market’s Hewson said. “It would probably take a further sharp fall in bond yields, and significant further U.S. dollar weakness for a move higher to play out, neither of which looks very likely at this moment in time.”

Data released Friday revealed that the U.S. created 531,000 jobs in October — more than expected — but a disappointing number of people chose to join the workforce last month and rising inflation dulled prospects for stronger economic growth.

In other Comex dealings Monday, December silver
SIZ21,
+1.77%

SI00,
+1.77%

climbed 39 cents, or 1.6%, to settle at $24.542 an ounce, after registering a weekly advance of 0.9% on Friday.

December copper
HGZ21,
+1.54%

tacked on 1.3% to $4.399 a pound. January platinum
PLF22,
+2.52%

rose 2.3% to $1,060 an ounce and December palladium
PAZ21,
+2.02%

settled at $2,077.70 an ounce, up 2.5%.

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