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Metals Stocks: Gold prices end higher after touching their lowest level in a week

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Gold prices ended a bit higher on Thursday, after touching their lowest intraday price in a week and posting declines over the past two sessions on the back of jitters centered on rising inflation.

“With gold and silver prices faltering in the wake of the hottest U.S. CPI month over month gain since 2009, it is clear that precious metals are still not in a position to benefit from rising inflation,” analysts at Zaner wrote in Thursday commentary.

On Wednesday, the data revealed that U.S. consumer-price index soared 0.8% to match the biggest monthly increase since 2009, leading to a rise in U.S. Treasury yields and the dollar. The rate of inflation over the past year jumped to 4.2% from 2.6% in the prior month—the highest level since 2008.

“The precious metal trade could be accepting the [Federal Reserve’s] view that inflationary pressures will be transitory, and clearly there are other forces applying pressure to gold and silver prices,” the analysts at Zaner said. “Rising interest rates and a stronger dollar knocked the legs out from under gold and silver prices [Wednesday], proving that outside market forces are the key driving force of action in precious metal markets.”

A recent resurgence in yields for U.S. government bonds to their highest levels in weeks and a perkier U.S. dollar, on the back of fears of pricing pressures building in the aftermath of the COVID pandemic, have been part of the recent drag on the precious metal, analysts have said.

On Thursday, however, the 10-year Treasury note
TMUBMUSD10Y,
1.664%

eased back to 1.66%, while the ICE U.S. Dollar Index
DXY,
+0.11%

was up less than 0.2%.

June gold
GCM21,
+0.12%

GC00,
+0.12%

 tacked on $1.20, or nearly 0.1%, to settle at $1,824 an ounce on Comex, after touching a low at $1,808.40, the lowest intraday level since May 6, according to FactSet data.

July silver
SIN21,
-0.49%

edged down by 0.7% to end at $27.06 an ounce.

Gold futures pared some of their early losses after data Thursday showed that U.S. wholesale prices increased sharply in April, with the producer price index up 0.6% for the month and 6.2% for the year.

Read: Why so many commodities, including lumber and iron ore, have climbed to record highs

Separately, initial U.S. jobless claims dropped 34,000 to 473,000 in the seven days ended May 8, the government said Thursday. It was the fifth decline in a row.

Higher than expected U.S. inflation numbers released this week suggest that the Federal Reserve should be “sitting up and taking notice and raising rates, rather than suggesting that inflation is only ‘transitory’,” said David Russell, director of marketing at GoldCore. But they are caught between their focus on jobs data, which is not going so well, and sinking a fragile recovery with higher rates, he told MarketWatch.

“Leverage in markets is really high” and the selloff in stocks in the wake of the inflation data pulled the precious metals complex down with it,” said Russell. Gold futures trade around 0.5% lower week to date.

“Traders are anxious about a correction in equities given the length of this bull run,” said David Russell, director of marketing at GoldCore. On Wednesday, gold’s decline coincided with losses in U.S. benchmark stock indexes, but prices for the metal moved up as the stock market traded mostly higher Thursday.

“Gold will always move in tandem with strong sell-offs in equities as leveraged positions become unwound,” Russell said. So while inflationary environments favor gold over the long term, “deleveraging will take place first.”

Most other metals traded on Comex finished lower Thursday. July copper
HGN21,
-0.96%

fell 1% to $4.69 a pound and July platinum
PLN21,
-1.71%

lost 1.6% to $1,206.50 an ounce. However, June palladium
PAM21,
+0.33%

added nearly 0.6% to $2,864.60 an ounce.

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