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Gold prices head for sharpest gain in 2 weeks, aim to snap 3-session skid

Gold futures headed higher on Tuesday, with the precious metal looking to end a three-session losing streak after the International Monetary Fund said the global economy is losing momentum.

In its World Economic Outlook report Tuesday, the IMF said it sees global growth of 5.9% this year, down one-tenth of a percent from July. It also said it sees slowing to 4.9% growth in 2022. For the U.S. the IMF cut its growth estimate for this year by 1% to 6%.

“The IMF report has dented the outlook for the U.S. economy, and this has made gold trade attractive once again,” Naeem Aslam, chief market analyst at AvaTrade, told MarketWatch. However, “But the gains may be short lived as we really do not see any major buying pressure backing up the current move.”

Investors are also looking for further cues on the outlook for the U.S. economy, with a reading of consumer prices, the consumer-price index, due to be released on Wednesday, and prices for wholesalers, the producer-price index, due on Thursday. See: MarketWatch’s economic calendar

Against that backdrop, December gold
GCZ21,
+0.72%

 
GC00,
+0.72%

was trading $13.10, or 0.7%, higher at $1,768.80 an ounce, following a 0.1% decline on Monday, which marked a third consecutive decline. If the contract can maintain the current advance, it will represent the best point and percentage gain, based on the most-active contract, since Sept. 30, FactSet data show.

Silver for December delivery
SIZ21,
+0.07%

SI00,
+0.07%

was up 1.5 cents, or nearly 0.1%, at $22.68 an ounce, after a 0.2% decline a day ago.

The 10-year Treasury note
TMUBMUSD10Y,
1.597%

was yielding around 1.588%, down from 1.604% on Friday. The Treasury market was closed on Monday in observance of Columbus Day, even as other markets were open. Meanwhile, the dollar was up 0.1% at 94.43, as measured by the ICE U.S. Dollar Index
DXY,
+0.19%
.

A pause in the rise of yields and the dollar can pave the way for higher moves in precious metals which are priced in dollars and don’t offer a coupon.

Strategists say that fears of increasing pricing pressures has unsettled global markets and provided some support for bullion.

At the same time, however, concerns about inflation, as the global economy tries to claw back from the aftershocks of the COVID-19 pandemic, has complicated the outlook for precious metals because an overheated economy may force central bankers to dial up interest rates sooner, a negative for gold and silver prices.

Rising inflation, due in part to the increasing energy prices, is “making the marketplace uneasy. U.S. inflation reports are due out Wednesday and Thursday mornings and will be closely scrutinized,” wrote Jim Wyckoff, senior analyst at Kitco.com in a daily research note.

Wyckoff also pointed to concerns about a possible spillover effect from beleaguered Chinese property developer Evergrande, which has reportedly missed another round of debt payments.

In other Comex dealings, December copper
HGZ21,
-0.13%

tacked on 0.3% to $4.379 a pound. January platinum
PLF22,
+0.81%

rose 1.2% to $1,019 an ounce, but December palladium
PAZ21,
-2.08%

fell 2.2% to $2,072.50 an ounce.

“In absolute terms, the IMF growth expectations are generally supportive of industrial commodity prices and global equity markets, even if the report was somewhat mixed,” said Jason Schenker, president of Prestige Economics.

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