Gold prices climbed Tuesday to their highest levels since 2013, as continued worries over the COVID-19 epidemic in China put pressure on stocks and sparked demand for assets perceived as havens, including gold and Treasurys.
“Gold is finding buoyancy from increased risk aversion, as reflected also in falling stock markets and declining bond yields. The gold price is continuing to defy the firm U.S. dollar, which on a trade-weighted basis is priced at a 4½-month high,” said Carsten Fritsch, analyst at Commerzbank, in a note.
Gold for April delivery GCJ20, +1.09% on Comex rose $17.20, or 1.1%, to settle at $1,603.60 an ounce after tapping a high at $1,608.20. That marked the highest settlement and intraday level for a most-active contract since March 2013, according to FactSet data. March silver SIH20, +2.32% also rose 41.6 cents, or nearly 2.4%, to $18.15 an ounce, for the highest finish since early January of this year.
“There is a good set-up for gold going into this and next week on the $1,600+ breakout and swing point,” Peter Spina, president and chief executive of GoldSeek.com, told MarketWatch. The swing past $1,600 could lead to prices moving much higher, “with $1700 to $1900 coming in play over the coming months.”
But a failure to breakout “will likely lead to more months consolidating around $1,500,” said Spina.
For gold, there are “many positives,” he said. “The latest is that now 100% of the US Treasury yield curve is now negative yielding, if you now take inflation into account. Negative real yields with falling rates is more fuel to gold prices heading, eventually, to record highs” in U.S. dollar terms.
U.S. benchmark stock indexes traded lower Tuesday as gold futures settled, joining global equities, after Apple Inc. AAPL, -1.82% said late Monday that the viral outbreak in China would hurt second-quarter results.
The demand for havens also sent down bond yields. The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -2.04% fell 4.1 basis points to 1.546%. Lower yields can enhance the attractiveness of gold by reducing the opportunity cost of holding non-yielding assets.
A stronger U.S. dollar, however, might have limited gold’s gains Tuesday. The ICE U.S. Dollar Index DXY, +0.41%, a measure of the currency against a basket of six major rivals, rose 0.4% to 99.396, after trading at a more-than-four-month high. A stronger dollar can be a drag for gold and other commodities priced in the unit, making them more expensive to users of other currencies.
In economic news, the New York Federal Reserve’s Empire State business conditions index rose 8.1 points to 12.9 in February, the highest level since last May. Gold prices moved up in the immediate wake of the data early Tuesday, after a dip lower just ahead of the data.
In other metals trading, March copper HGH20, +0.23% edged up by 0.2% to $2.604 a pound.
March palladium PAH20, +8.04% rose 7.8% to $2,497.60 an ounce—posting another record settlement, while April platinum PLJ20, +2.51% gained 2.6% to $993.90 an ounce.
“Apparently, traders see the palladium market as a tighter supplied safe haven instrument, which many have suggested is a very compacted store of portable assets,” analysts at Zaner Metals wrote in a daily note.
“Keep in mind earlier this year a Russian [platinum group metals] sector CEO suggested that this year’s deficit could be as large as 1 million ounces, which would be the largest deficit since 2014,” they said. “However, we have serious reservations a deficit of that size will be seen this year as we think demand for auto catalyst will take a hit because of the Chinese virus.”
Source: Read Full Article