Metals Stocks: Gold climbs back above $1,500 for highest finish in two weeks

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Gold prices climbed above the key $1,500 mark on Thursday to mark their highest finish in about two weeks, as a monthly drop in U.S. durable goods orders buoyed haven appeal for the metal.

Prices had edged lower in early dealings as global stocks traded higher on better-than-expected quarterly earnings results and traders weighed the final policy update from European Central Bank President Mario Draghi. U.S. benchmark stock indexes, however, saw mixed trading as gold futures settled Thursday.

The “dismal durable goods number is helping boost gold prices as recession fears are again on the rise,” said Tyler Richey, co-editor at Sevens Report Research.

Orders for long-lasting or durable goods fell in September for the first time in three months, by 1.1%. Economists surveyed by MarketWatch had forecast a 0.8% decline.

The U.S. IHS Markit purchasing managers index for both the manufacturing and services both saw some improvement in October but the employment subcomponent fell to 47.5 versus 48.6 in September, the lowest reading since Dec. 2009 and second consecutive month of contraction.

“Despite business activity lifting from recent lows, the survey data point to annualized GDP growth of just under 1.5% at the start of the fourth quarter, and a near-stalling of new order growth to the lowest for a decade suggests that risks are tilted toward growth remaining below trend in coming months,” Chris Williamson, chief economist at IHS Markit, said. “An increased rate of job culling adds to the gloomy picture, with jobs being lost among surveyed companies at a rate not seen since 2009”, he added referring to weakness in the manufacturing sector.

December gold GCZ19, +0.64% on Comex tacked on $9, or 0.6%, to settle at $1,504.70 an ounce, after posting a 0.6% gain Wednesday. Prices for the most-active saw their highest settlement since Oct. 9, according to FactSet data.

Silver for December delivery SIZ19, +1.34%, meanwhile, added 22.4 cents, or 1.3%, to reach $17.804 an ounce, following a gain of 0.5% on Wednesday.

For gold, “the upside move is being amplified to a degree by market technicals, as futures broke above a key resistance level just above $1,500 and squeezed to a multi-week high,” said Richey.

“We are likely to see some digestion in gold prices in the near term but as long as there is elevated demand for safe havens—keeping a lid on yields, gold should be able to drift back up towards $1,520,” he said.

Meanwhile, in the final meeting with Draghi at the helm, the European Central Bank left its main deposit facility rate at negative 0.5% and its main lending rate at 0%. The rate-setting Governing Council repeated that it expects to keep rates at “present or lower levels” until inflation, which has remained stubbornly low, “robustly” converges with its target of near but just below 2%. It also reiterated that it will begin a controversial bond-buying program at a pace of 20 billion euros a month beginning in November.

Draghi’s swan song came ahead of the Federal Reserve’s Oct. 29-30 policy meeting, which is expected to result in a 25 basis-point cut to benchmark rates — a decision that could add a boost to gold prices.

“Gold does best when people lose faith in central bankers, and while Mario Draghi left the ECB today with negative rates and €20bn per month of new [quantitative easing], Trump continues to bully the Fed on cutting rates and re-starting stimulus,” said Adrian Ash, director of research at BullionVault. “This race to debase makes gold a stand-out choice for long-term wealth protection.”

In other metals trade, December copper HGZ19, -0.17%  edged down by 0.1% to settle at $2.668 a pound.

January platinum PLF20, +0.43%  gained $2.70, or 0.3%, at $925.10 an ounce, adding to its 3% gain on Wednesday. It logged a third straight session gain and its highest finish month to date. December palladium PAZ19, +2.01%  rose 1.9% to $1,747.90 an ounce—a fresh record high.

“Platinum doesn’t have the bullish [tight supply] story that palladium does, but it seemed to find some value after falling to roughly 50% of the price of palladium and gold,” said analysts at Zaner Metals, in a daily note.

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