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Metals Stocks: Gold prices at highest in more than week, on track for back-to-back gains

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Gold futures climbed Monday for a second straight session to their highest prices in more than a week, as disappointing U.S. economic data provide support for the haven metal.

Contracts for gold moved higher after data from the New York state region, the Empire State factory index, showed a drop to 18.3 in August from 43 in the prior month.

The gains for the precious metal come despite reports that the Federal Reserve is moving toward a concrete plan to unwind some aspects of COVID-era easy-money policies.

“Gold is surprisingly thriving a week after a small flash crash sent it tumbling back towards $1,680,” said Craig Erlam, senior market analyst at Oanda. “Since then, the yellow metal has done well; a combination of an overexaggerated initial move being unwound and a softer dollar/lower yields giving it new life.”

U.S. consumer sentiment data on Friday was “particularly good for gold as it sent U.S. yields and the dollar sharply lower, he said in a note. The “worst sentiment reading in almost a decade turbocharged the move, which is why gold exploded back above the $1,740-$1,760 resistance zone and now finds itself flirting with $1,800 once more.”

Still, Erlam believes gold’s fortunes may not have drastically improved just yet, unless the economic data is a “first in a series of shocking economic numbers for the U.S.” Gold will “struggle to break $1,800, and the fact that it marks the 50% retracement of the early June highs to August lows won’t help matters,” he said.

At last check, December gold
GCZ21,
+0.55%

was up $12.90, or 0.7%, at $1,791.10 an ounce after touching a high at $1,791.30, the highest intraday level since Aug. 6, FactSet data show.

Bullion had been under pressure against the backdrop of political unrest in the Middle East, including the takeover of Afghanistan, which was stoking modest buying in safe-haven assets, with the 10-year Treasury note
TMUBMUSD10Y,
1.259%

yielding 1.248%, down from 1.297% on Friday.

Bearish factors for gold, however, keeping prices for precious metal in check, were data that highlighted an economic slowdown brewing in China, one of the biggest buyers of commodities including gold, amid the spread of the delta variant of COVID-19.

On top of that, Fed officials were seen moving toward an agreement on a timetable that could result in the central bank beginning to scale back its monthly purchases of $120 billion in Treasurys and mortgage-backed securities in about three months, if the economic recovery continues, The Wall Street Journal reported Monday.

Moves to withdraw accommodation are seen as potentially bearish for precious metals because it could push yields for Treasurys, which compete with gold for haven demand, higher.

Still, some bullish strategists see gold retaining some upward momentum after last week’s rebound.

“The bulls still have some momentum on their side,” wrote Jim Wyckoff, analyst at Kitco.com. “A bit more anxiety in the marketplace this week may also support the precious metals markets, on some safe-haven demand,” he wrote, in a daily note.

Meanwhile, the growing number of delta variant cases remains a key concern.

“Gold is being partially supported by lower growth rate projections,” Chintan Karnani, director of research at Insignia Consultants, told MarketWatch, adding that he doesn’t expect Fed tapering to be as swift as markets have factored in.

Tuesday’s U.S. July retail sale numbers would have to come in very high “to allay fears that consumers are affected by inflation,” said Karnani. “U.S. July retail sale numbers on the lower side of expectation will result in gold price breaking past $1,836 for $1,878.

Meanwhile, silver for September delivery
SIU21,
+0.07%

 was little changed at $23.78 an ounce, after a 2% weekly decline.

September copper
HGU21,
-1.48%

lost 1.8% to $4.31 a pound. October platinum
PLV21,
-0.72%

fell 0.9% to $1,016.80 an ounce and September palladium
PAU21,
-2.64%

traded at $2,587.50 an ounce, down 2.6%.

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