Metals Stocks: Gold stretches streak of gains to 6th session — longest of 2021

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Gold ended higher Thursday, shaking off early losses to extend its streak of price gains to a sixth consecutive session — the longest so far in 2021.

The move for the precious metal comes a day after minutes from the Federal Reserve’s April meeting suggested that the central bank is contemplating when it will begin scaling back monetary-policy support for the economy.

Gold began to move lower in electronic trade Wednesday following minutes from the Federal Reserve’s April meeting, released after gold futures settled, showed that members of the Federal Open Market Committee agreed that any price increases from bottlenecks are likely to only have “transitory effects” on inflation.

The minutes also implied, however, that the FOMC may be moving toward discussing a pathway toward rolling back some of its pandemic-era accommodations as the economy rebounds from COVID-19.

“Investors took big steps over the past few days toward recognizing gold’s traditional role as the pre-eminent hedge against inflation and currency depreciation,” said Brien Lundin, editor of Gold Newsletter.

“The next stop, still untaken, will be to recognize that, yes, Fed rate hikes are coming, but when they come, they’ll remain far behind the rate of inflation, because they have to be,” he told MarketWatch shortly after the release of the Fed minutes.

“As that understanding takes hold, investors will find gold remains the best way to protect their assets against the higher rates of inflation,” said Lundin.

June gold
GCM21,
-0.39%

GC00,
-0.39%

edged up by 40 cents, or 0.02%, to settle at $1,881.90 an ounce, following a 0.7% gain on Wednesday. The climb was gold’s sixth in a row, the longest stretch of consecutive session gains since a nine-session climb ended on July 29, 2020, FactSet data show. Prices on Thursday settled at the highest for a most-active contract since Jan. 7.

July silver
SIN21,
-0.77%

SI00,
-0.77%
,
meanwhile, rose 4 cents, or nearly 0.2%, to end at $28.07 an ounce.

“A number of participants suggested that if the economy continued to
make rapid progress toward the committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of
asset purchases,” the Fed minutes, released Wednesday, said.

However, the “pace of asset purchases had to end at some point and there is still no timetable or real target,” said Jeff Wright, chief investment officer at Wolfpack Capital, late Wednesday. So that was more “just a quick take, not a policy shift.” 

“Vagueness on tapering” in the minutes and the Fed taking a “‘hawkish’ stance on interest rates, along with less concern for inflation than the Fed would historically take” contributed to gold’s rise Thursday, he told MarketWatch Thursday. Gold may still move higher, but “will face resistance and profit taking above $1,900.”

On Thursday, economic data offered a mixed picture of the COVID recovery phase.

A reading on U.S. unemployment benefits continued to decline to a pandemic low in mid-May as companies ramp up hiring efforts. Initial jobless claims fell 34,000 to 444,000 in the week ended May 15. Economists surveyed by Dow Jones and The Wall Street Journal had forecast new claims to fall to a seasonally adjusted 452,000.

“There was misconception in the jobless claims data,” said Wright. “While the new jobless claims number was better than estimates, the continuing jobless claims number of 3.75 [million] was an increase of approximately 111,000 so holistically, the jobless claims data is mixed and not an outright negative factor for gold in the short term,” he said.

Meanwhile, a reading of manufacturing activity in the Philadelphia area, the Philly Fed factory index, fell to 31.5 in May from a 50-year high of 50.2 in April. Separately, the leading economic index rose 1.6% in April after a 1.3% gain in March. It was the strongest gain since last July.

Against that backdrop, copper futures notched back-to-back declines, with the July contract
HGN21,
-0.69%

down 0.2% at $4.57 a pound after a more than 3% loss Wednesday.

July platinum
PLN21,
+0.01%

tacked on 0.3% to $1,205 an ounce, but June palladium
PAM21,
-0.84%

fell 0.5% to $2,870.20 an ounce. the September palladium contract
PAU21,
-0.96%
,
which is also among the most active, lost 0.5% to $2,879.40 an ounce.

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