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Metals Stocks: Gold futures settle at lowest in a month as investors wrestle with inflation outlook

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Gold futures fell Monday, with prices marking their lowest settlement in a month as U.S. Treasury yields strengthened a bit ahead of an important meeting of the Federal Reserve.

The precious metal has gained 13% over the last 10 week and it is seeing some profit-taking ahead of the Federal Open Market Committee’s monetary policy decision due Wednesday, Ross Norman, chief executive officer at Metals Daily, told MarketWatch.

“Despite strong indications that inflation is gathering momentum, the market clearly fears that the Fed may hint about QE tapering at the FOMC — a lot seems to hinge on what ‘temporary means’ [in regard to] inflation,” said Norman. “By shifting discussions out beyond the sizzling inflation data in May, they have scope to shift attention beyond that, which would damage gold’s prospects.” 

For now, gold likely has support at $1,855, a breach of which would lead prices back down to $1,840,” he said, adding that currently, the trend is holding well.

Gold for August delivery
GCQ21,
-0.74%

GC00,
-0.74%

 fell $13.70, or 0.7%, to settle at $1,865.90 an ounce, after prices for the most-active contract settled down about 0.7% for the week. Based on the most-active contracts, prices saw their lowest finish since May 14, FactSet data show.

“Gold had a nice run recently, but has started to back away from $1,900 in what I think is common after becoming overbought and meeting technical resistance,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.

“Over the past few months, on a day-today basis, we have seen alternative currency capital swinging back and forth between precious metals and cryptocurrencies,” he told MarketWatch, adding that Monday’s rebound in bitcoin
BTCUSD,
+9.68%

may be “siphoning away some demand from gold and silver.”

July silver SI00 SIN21 lost 11 cents, or 0.4%, at $28.04 an ounce, after booking a 0.9% weekly gain on Friday.

The Fed’s two-day policy meeting starts Tuesday. Commodity investors will be keyed in on the central bank’s view on inflation and the labor market, which have diverged in recent months, as reports on inflation have come in stronger than expected and jobs reports have been weaker than expected in the recovery phase of the pandemic.

Gold is seen as a hedge against inflation and trade in Treasurys have implied that fixed-income investors have deemed price pressures as likely fleeting. The 10-year Treasury note
TMUBMUSD10Y,
1.505%

was yielding around 1.50%, after touching lows around 1.45% to hang near its lowest levels since March. Bond prices and yields move in opposite directions. A gauge of the U.S. dollar, the ICE U.S. Dollar Index
DXY,
-0.06%
,
was down less than 0.1%.

Against that backdrop, gold now trades lower for the month, as well as the year so far, but some investors are bullish on the outlook for bullion.

“The precious metal is losing some of its mojo as the price has moved away from the [$1,900] price level. However, the current retracement in the gold price doesn’t impose any long term threat to its uptrend,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a Monday note.

Meanwhile, rounding out action on Comex, July copper
HGN21,
-0.36%

shed 0.2% to $4.53 a pound. July platinum
PLN21,
+1.23%

added 1.2% to $1,165.30 an ounce, while September palladium
PAU21,
-1.02%

settled at $2,756.60 an ounce, down 0.9%.

Market Snapshot: Dow off 200 points but Nasdaq nears record as stock-market investors gear up for Fed update

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