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Dollar Rally Stalls and Gold Rebounds After Steep Selloff

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EDITOR NOTE: In the next few weeks to months, pay close attention to labor market reports and inflation readings. The effect of higher inflation and a soft labor market is obvious; it’s bullish for gold as the Fed is likely to continue suppressing interest rates and maintaining its massive asset purchases. But higher inflation and a strengthening labor market may signal a possible rate hike, not in 2023 as the Fed had announced, but sooner, in 2022. This will likely send the broader market tumbling down--yet another reason to hedge your portfolio with physical gold if and when gold rebounds. And as President Biden’s proposed infrastructure spending gets approved and implemented, it will likely boost demand for physical silver, which, as you know, is both a monetary and industrial metal. Either way, regardless of the outcome, bullish opportunities in non-CUSIP physical gold and silver abound.

Gold on Monday clawed back some losses from its biggest weekly percentage drop since March 2020, as a pause in the U.S. dollar’s rally helped restore the metal’s allure.

Spot gold was up 1.1% at $1,782.83 per ounce by 1:48 p.m. EDT (1748 GMT), while U.S. gold futures settled up 0.8% at $1,782.90.

“People are using the correction to buy gold, at these price levels, there is value to hold positions in gold, especially for the long run,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago

Gold prices fell 6%, or $113 an ounce, last week as the U.S. Federal Reserve signaled it would soon start tapering its asset purchases and could start raising interest rates in 2023.

But the dollar index has retreated from 2-1/2-month highs, prompting investors to turn to gold, which fell for six straight sessions before Monday’s bounce.

U.S. 10-year Treasury yields also rose from a four-month low, raising non-yielding bullion’s opportunity cost. .

Bank of America Global Research said that given a more hawkish Fed, the risk of rising real rates would keep gold prices capped into the end of the year.

Streible, however, predicted gold would drift above $1,800 an ounce, citing an “overbought” dollar, the Fed’s continued bond purchases and interest rates that will not rise anytime soon.

Market participants will listen now to congressional speeches from a number of U.S. central bank officials, including Fed Chair Jerome Powell, who is due to speak on Tuesday.

In other precious metals, platinum rose 2.5% to $1,060.05 per ounce, while palladium climbed 4.5% to $2,575.24 after tumbling more than 11% last week.

Global palladium markets have been in deficit this year due to rebounding economic growth and tighter emissions standards that boosted demand from automobiles. Another negative factor has been supply glitches at Russia’s Nornickel.

Analysts at trading firm Heraeus said, however, that supply chain disruptions in automobiles could ease the tightness in palladium markets.

Elsewhere, silver rose 0.6% to $25.95 an ounce.

Originally posted on CNBC

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