Gold futures settled at a fresh eight-month high Wednesday, a day ahead of the latest reading on U.S. inflation, as traders bet that China’s decision to drop COVID-19 restrictions on its economy will continue to boost prices of precious and industrial metals.
Price action
- Gold futures for February delivery GC00, +0.28% GCG23, +0.28% rose $ 2.40, or 0.1%, to settle at $ 1,878.90 an ounce, the highest finish for a most-active contract since May 6, FactSet data show.
- March silver SI00, -0.38% SIH23, -0.38% declined by 18 cents, or 0.8%, to $ 23.481 per ounce.
- Palladium for March PAH23, -0.10% advanced $ 3.80, or 0.2%, to $ 1,781.10 per ounce, while platinum for April PLJ23, -0.61% lost $ 4.20, or 0.4%, to $ 1,084.30 per ounce.
- March copper HGH23, +2.43% rose by 9 cents, or 2.2%, to $ 4.166 per pound, ending at the highest price for the industrial metal since June.
Market drivers
The market is “laser focused” on the U.S. consumer price index data due out Thursday, and if the CPI comes in lower than anticipated “this could be supportive for gold,” said Jeff Wright, chief investment officer at Wolfpack Capital. “Otherwise, I would anticipate a sell off of all asset classes and U.S. Treasury yields to take off once again.”
Even if gold goes over $ 1,900, Wright told MarketWatch he anticipates “profit taking in the near term.”
Still, based technical analysis, gold futures may be headed toward a so-called “golden cross.” That happens when a short-term moving price average crosses above a long-term moving average, potentially indicating a change in sentiment toward the metal.
On Wednesday, the 5-day MA was at $ 1,779.29, while the 200-day MA was at $ 1,786.89, according to price analysis by Dow Jones Market Data. The last golden cross for gold futures was on Feb. 11 of last year, when the 50-day MA closed above the 200-day MA.
For now, the reopening of China’s economy after the lifting of COVID-related restrictions has helped push demand for industrial metals and precious metals higher.
Jim Wyckoff, senior analyst at Kitco.com, said, “ideas of better economic growth in China are supporting metals prices on notions of increased demand,” in a note to clients published Wednesday.
Copper futures traded at their highest levels since June and gold settled Wednesday at its highest since May.
The rise in gold prices has also been supported by a fall in the U.S. dollar against major currencies since last November as U.S. bond yields have eased.
See: U.S. dollar on the verge of first ‘death cross’ since 2020 as rally unravels
The ICE U.S. Dollar Index DXY, +0.02%, a gauge of the currency’s strength against its main rivals, was little changed at 103.26 in Wednesday dealings, trading 0.6% lower for the week so far.
Traders were also “optimistic” about the Federal Reserve’s monetary policy and believed that the central bank is likely to “adopt a less hawkish one,” said Naeem Aslam, chief market analyst at AvaTrade, even as Fed Chairman Jerome Powell, speaking Sweden Tuesday, didn’t drop any big hinds about Fed policy.