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Metals Stocks: Gold futures on track for a second straight decline to lowest finish in 7 weeks

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Gold futures declined on Wednesday for a second session in a row, with a climb in the U.S. dollar to near its highest levels since November positioning prices for the precious metal to post another finish at their lowest in sevens weeks.

The U.S. Federal Reserve is “being cautious with regard to the intensity of the taper-talk so as not to spook equity markets too much,” said David Russell, director of marketing at GoldCore, told MarketWatch. “It is definitely a case of trying to influence the market with their words rather than their actions at this point.”

“Gold and silver have not fared well in this environment,” he said. “Further downside in metals can be expected short term if either the taper-talk increases or the stock markets react negatively to same.”

Read: Powell says some bottlenecks sparking inflation have gotten worse

Meanwhile, a realization that the Fed has “painted itself in to a corner and, in reality, has little scope for any sort of a meaningful taper will see gold and silver break to the upside once again,” said Russell.

Read: Fed’s Harker says first interest rate hike may come late next year or early 2023

In Wednesday dealings, December gold lost $11.40, or 0.7%, to trade at $1,726.10 an ounce, following a 0.8% decline on Tuesday, pushing the most-active contract to the lowest settlement since Aug. 10, FactSet data show.

The popular ICE U.S. Dollar Index
DXY,
+0.50%

was up nearly 0.5% for the day, and the index is up 0.9% so far this week and 1.9% over the past quarter.

“Gold and silver prices have been hit by a new rebound of the U.S. dollar and by the rise of the 10-year yields,” wrote Carlo Alberto De Casa, analyst at Kinesis Money, in a daily note.

On Tuesday, gold and other precious metals, which don’t offer a coupon, were under pressure as the benchmark 10-year Treasury yield
TMUBMUSD10Y,
1.520%

rose to the highest since June 25 and the 30-year long bond
TMUBMUSD30Y,
2.061%

hit its highest yield since July 1, according to data compiled by Dow Jones Market Data. Bonds compete against gold for safe-haven demand and higher yields can undercut the comparative appeal of the precious metal.

De Casa notes that the moves in precious metals are driven by the “perception that the current inflation will not be as ‘transitory’ as predicted by central banks in the past few months.” he wrote.

“This scenario will probably force the Federal Reserve to begin tapering (the process of reducing the liquidity in the system) as soon as November,” he wrote.

The rise for Treasury yields may have subsided for now though, with the 10-year Treasury note at 1.504%, versus 1.534% on Tuesday.

Trading in gold on Wednesday also comes as global equity markets rebounded from a selloff that saw the S&P 500
SPX,
+0.50%

register its worst percentage fall since May 12.

Among other metals on Comex, December copper
HGZ21,
-0.80%

lost 0.8% to $4.211 a pound. January platinum
PLF22,
-1.22%

lost 1.8% to $944.60 an ounce, but December palladium
PAZ21,
+1.20%

tacked on 1% to $1,872 an ounce.

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