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Metals Stocks: Gold futures inch higher as data show U.S. trade deficit rose to a record in 2021

Gold futures inched higher on Tuesday after data revealed that the U.S. international trade deficit climbed to a record in 2021.

Prices for the metal had been trading mostly lower ahead of that, as yields for government debt rose and the U.S. dollar picked up some strength.

Gold turned higher, touching highs above $1,825, shortly after data released Tuesday showed that the U.S. trade deficit jumped 27% in 2021 to a record $859 billion. The deficit widened in December by 1.8% to $80.7 billion — the second largest monthly increase ever.

A fresh “supportive storyline” for gold might surface from the U.S. trade front with reports that U.S. officials have expressed concern and dismay that China has not met its trade promises,” analysts at Zaner wrote in Tuesday’s market commentary.

Following the U.S. trade deficit data, “focus on trade with China could become a more prominent flight to quality issue like the Ukraine conflict,” they wrote ahead of the data’s release, implying a climb in haven demand for gold.

April gold GC00, +0.17% GCJ22, +0.17% edged up by $1.87, or 0.1%, to trade at $1,823.50 an ounce. Prices rose 0.8% on Monday to mark the precious metal’s biggest one-day gain for a most-active contract since Jan. 19 and highest settlement since Jan. 26, FactSet data show. 

Still, gold’s gain was modest with the yield on the 10-year Treasury note TMUBMUSD10Y, 1.967% up at 1.96%, to around highs not seen since 2020, and the dollar up 0.3%, as gauged by the ICE U.S. Dollar Index DXY, +0.27%, a measure of greenback against a half-dozen rival currencies.

Higher yields and a stronger dollar can undermine interest in dollar-pegged bullion, which doesn’t offer a coupon.

“Still-elevated inflation expectations saw traders buy gold ahead of this week’s key CPI report on Thursday, which has the potential to be a major catalyst for the gold market this week,” analysts at Sevens Report Research wrote in Tuesday’s newsletter.

“If we see a hot report and the odds of a 50-bps hike next month rise, then expect hawkish money flows and rising real rates to hit gold,” they said. “If the report is not as-hot-as-feared, then a continued rally into the mid-$1,800s will become increasingly likely as the Fed will be viewed as ‘behind the curve’ by the market,” so higher inflation for longer.”

Meanwhile, March silver SIH22, +0.32% was trading up by 6.4 cents, or 0.3%, at $23.14 an ounce, after rising 2.7% on Monday.

March copper HGH22, -0.75% lost 0.6% to $4.434 a pound. April platinum PLJ22, +1.05% tacked on 1.1% to $1,030.50 an ounce, but March palladium PAH22, +0.08% traded at $2,260 an ounce, down nearly 0.1%.

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