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Metals Stocks: Gold prices up a fourth session to mark highest finish in over 5 weeks

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Gold futures settled higher on Tuesday, with the International Monetary Fund raising its global economic growth outlook and a decline in yields for U.S. benchmark bonds pushing prices up for a fourth consecutive session to their highest finish since late February.

The price rise is mainly due to the IMF releasing U.S. and global economic forecasts showing a robust recovery this year, as well as Tuesday’s drop in U.S. bond yields, Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch.

IMF officials backed the Federal Reserve’s decision to be patient about pulling back on its easy monetary policy stance which has been supportive for gold.

At the same time, U.S. equities at all-time highs are “making some institutional folks nervous…as to how much higher can we push valuations ahead of earnings season,” he said, so there has been “some short covering” in gold market.

That being said, Wright believes that the “bias is still negative for gold in the short run.” He also said he’s not certain if the market has reached a “bottom” for prices because if bond yields and the U.S. dollar both rise later in the week or next, gold will drop again. 

“I am still optimistic in longer term in gold but not ready to call a bottom,” he said.

The most-active June gold
GCM21,
+0.94%

GC00,
+0.94%

 contract on Comex gained $14.20, or 0.8%, to settle at $1,743 an ounce. Gold prices logged a fourth straight gain, matching its longest string of advances since a similar stretch ended Feb. 10, FactSet data show.

Prices based on the most-active contract settled at their highest since Feb. 25.

The 10-year Treasury note yield
TMUBMUSD10Y,
1.657%

pulled back to around 1.66% in Tuesday dealings. Meanwhile, the Dow Jones Industrial Average
DJIA,
-0.16%

moved lower, while the S&P 500 index
SPX,
+0.07%

climbed to an intraday record.

One analyst said that gold has been gathering some upward momentum as an climb for the U.S. dollar has seemingly abated.

“Gold is consolidating above $1,730 as the greenback is slowing down,” wrote Carlo Alberto De Casa, chief analyst at ActivTrades in a daily note. “We are in a phase where gold remains inversely correlated with US yields and the US dollar where any movement of these two assets is generating the opposite reaction on bullion,” he said.

The U.S. dollar in Tuesday dealings was down 0.2% to 92.39, as measured by the ICE U.S. dollar index
DXY,
-0.25%
.

Weakness in the dollar can make assets priced in the currency comparatively less expensive to overseas buyers of the commodity and a decline in bond yields can boost demand for precious metals which don’t offer a coupon.

Overall, however, gold has been “struggling to compete for attention,” said Adrian Ash, director of research at BullionVault.

Data from BullionVault shows that gold investment among private investors has fallen to pre-pandemic levels, with gold demand at the online precious metals dealer falling in March to 24 kilos, worth less than $1.4 million.

For now, “we haven’t seen any meaningful bargain hunting to date” in gold, said Ash. “Gold is likely to stay sidelined for as long as equities keep surging in anticipation of the economy re-opening.”

Among other metals traded on Comex, May silver
SIK21,
+1.82%

tacked on 1.8% to $25.23 an ounce and May copper
HGK21,
-0.68%

edged down by 0.5% to $4.12 a pound. July platinum
PLN21,
+2.60%

tacked on 2.5% to $1,240.50 an ounce and June palladium
PAM21,
+0.95%

settled at $2,690.20 an ounce, up 1.3%.

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