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Metals Stocks: Gold settles back above $1,800 after clinching 2nd straight gain

Gold futures climbed for a second session in a row on Tuesday, settling above the significant $1,800 an ounce level to start the month, as weakness in the U.S. dollar helped foster some buying in bullion.

Gold was able to claw back some of the past week’s post Federal Reserve meeting losses on Monday “as multiple Fed speakers echoed that policy tightening needs to be very gradual, while reiterating the Fed is not ‘behind the curve’,” said analysts in Tuesday’s newsletter from Sevens Report Research.

On Monday, San Francisco Fed President Mary Daly said the central bank isn’t behind the curve and that coming rate hikes would be “gradual and not disruptive.”

In an interview with Bloomberg TV, Philadelphia Fed President Patrick Harker on Tuesday said it would take another burst of inflation to justify an aggressive interest-rate increase when the Fed starts to raise rates next month.

The threat of a 50 basis-point interest rate hike in March was “downplayed
by multiple Fed speakers and that also helped gold reclaim the psychological $1,800 level,” Sevens Report Research analysts said.

“Looking ahead, the gold market remains rangebound between support at $1,770 and resistance at $1,850, but if Fed expectations turn hawkish again and real rates rise, expect more pressure on the gold market in the near to medium term,” they said.

April gold GCJ22, +0.28% GC00, +0.28% rose $5.10, or 0.3%, to settle at $1,801.50 an ounce, following a 0.6% gain a day ago, which helped to reduce a monthly decline to 1.8%, the biggest monthly fall since September. Tuesday’s settlement was the highest for a most-active contract since Jan. 26, FactSet data show.

Gold is “not out of the bearish woods” yet, Chintan Karnani, director of research at Insignia Consultants, told MarketWatch. It needs to trade over $1,800 — both after the release of January ADP numbers on Wednesday and after the release of January nonfarm payrolls numbers on Friday to “continue its rise.”

“Irrespective of the January jobs numbers, gold has to trade over $1,800 to be in a short-term bullish zone and try to break past the January high of $1,854.20,” said Karnani.

Bullish gold buyers have been upbeat about the yellow metal and see it eventually taking a more pronounced step higher, as concerns about the economy and the stock market, which has been increasingly more volatile in the past several weeks, persist.

“Rising interest rates raise the opportunity cost of holding gold, making it less appealing to investors. However, the dollar index has retreated from multi-month highs, which has supported gold prices to some extent,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a daily note.

“In the short term, investors should keep in mind that rising consumer prices and greater volatility in stock markets will likely support the precious metal,” the analyst wrote.

Gold prices continued to trade higher after data Tuesday showed the ISM barometer of U.S. manufacturing activity fell to a 14-month low of 57.6% in January from 58.8% in December.

Meanwhile, silver for March delivery SIH22, +0.79% added 20 cents, or 0.9%, to $22.595 an ounce, following a 0.4% gain on Monday, which helped to pare a monthly loss to 4.1%.

Among other metals traded on Comex, March copper HGH22, +2.28% tacked on 2.5% to $4.434 a pound.

April platinum PLJ22, +0.59% rose 0.2% to $1,023.20 an ounce, while March palladium PAH22, -0.42% settled at $2,346.50 an ounce, down 0.4%.

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