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Metals Stocks: Gold settles lower, loses grip on $1,800 mark

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Gold futures settled lower on Wednesday, with the sharpest daily drop in more than two weeks pulling prices back below the $1,800-an-ounce mark for the first time in three sessions.

Gold and silver prices were trading “on routine downside corrections after recent gains,” said Jim Wyckoff, senior analyst at Kitco.com. “Keener risk” sentiment recently is a “bearish element for the safe-haven metals,” he said.

The Nasdaq Composite COMP and the S&P 500 index SPX finished at record closing highs on Tuesday, and moved even higher in Wednesday dealings.

Against that backdrop, December gold
GCZ21,
-0.84%

 fell $17.50, or 1%, to settle at $1,791 an ounce, losing its grip on the level of $1,800, after rising 0.1% on Tuesday. Prices for the most active contract posted their biggest one-day percentage decline since Aug. 9, FactSet data show.

Silver for September delivery
SIU21,
-0.10%

SI00,
-0.10%

ended 12 cents, or 0.5%, lower at nearly $23.78 an ounce, following a 1% rise on Tuesday.

“Given how the precious metal remains highly sensitive to [Federal Reserve] taper talk, the next few days promise to be eventful,” Lukman Otunuga, manager, market analysis at FXTM, told MarketWatch.

Metals traders await the annual Jackson Hole central bankers monetary-policy symposium where Fed Chairman Jerome Powell on Friday may indicate that the central bank will slow monthly purchases of Treasurys and mortgage-backed securities, which could influence gold buying.

A dovish Powell who “fails to provide the tapering roadmap could hit the dollar, ultimately injecting gold bugs with renewed confidence, while a formal announcement on tapering could “deal a heavy blow to gold as the dollar rallies,” said Otunuga.

Early Wednesday, Naeem Aslam, chief market analyst, attributed the recent surge in gold prices to a “downturn in economic activity, which has led traders to believe that the central bank’s stimulus tapering may be delayed in order to provide more support to the U.S. economy.”

The U.S. government on Tuesday reported that orders for long-lasting goods fell 0.1% last month, for the second time in 15 months.

For now, commodity experts said that gold may be wedged in between a short-term moving average at $1,793.33 an ounce and its 200-day MA at $1,812.59, with the latter serving as resistance, as investors see more opportunity in stocks rather than safe-haven assets like gold and bonds.

FactSet

“And that’s exactly what prevents gold from gaining above the $1800 per ounce. Stocks are too appetizing, too prosperous for investors to sit on gold,” wrote Ipek Ozkardeskaya, senior analyst at Swissquote, in a daily note.

“The topside in gold should remain limited, as long as we see the US equities claiming new records,” the analyst wrote.  

The slump for bullion also comes as the dollar, as gauged by the ICE U.S. Dollar Index, was up 0.1%, though it is on track for a weekly retreat of 0.6%. On top of that, the 10-year Treasury note BX:TMUBMUSD10Y was at around 1.347%, representing a roughly two-week high.

A stronger dollar can make dollar-pegged bullion relatively expensive to overseas buyers, while rising yields can make government debt more appealing to those seeking assets perceived as havens.

Among other Comex metals, September copper
HGU21,
+0.19%

tacked on 0.2% to $4.27 a pound. October platinum
PLV21,
-1.47%

fell 1.6% to $993.50 an ounce, while September palladium
PAU21,
-0.63%

settled at $2,430.70 an ounce, down 0.5%.

The Tell: U.S. households and small businesses have stockpiled a mind-blowing record cash pile of almost $17 trillion

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