EDITOR'S NOTE: Although there are several signs that traditionally wouldn’t bode well for gold futures — stocks up, the dollar staying firm, less concern over omicron — they finished out the year up, per Market Watch. The report continues, “Some slippage in Treasury yields limited the early downward tug for bullion, and investors stepped in as the session progressed to support the commodity’s advance above a psychologically significant price at $1,800.” The fact that gold is staying above $1,800, despite downward forces, is very good news for the yellow precious metal and bodes well for gold’s performance heading into 2022.
Gold futures on Thursday finished higher, despite firmness in the U.S. dollar and a rally in stocks that took the Dow Jones Industrial Average DJIA, -0.25% and the S&P 500 SPX, -0.30% to intraday records, as investors became less concerned about the omicron variant of COVID slowing economic growth.
Some slippage in Treasury yields limited the early downward tug for bullion and investors stepped in as the session progressed to support the commodity’s advance above a psychologically significant price at $1,800.
February gold GCG22, +0.58% GC00, +0.58% traded $8.30, or 0.5%, to settle at $1,814.10 an ounce, after declining 0.3% on Wednesday. Many technical investors see gold holding above $1,800 as an important level that can signal positive or negative momentum.
Naeem Aslam, chief market analyst at AvaTrade cited gold’s ability to hold above $1,800, despite the 10-year Treasury note TMUBMUSD10Y, 1.504% rising to above 1.55% at its intraday peak a day ago as a plus for gold. Higher yields can dull appetite for bullion which doesn’t offer a coupon.
“In normal circumstances, a rise in treasury yields drags down the price of gold due to a rise in opportunity cost,” Aslam wrote, in a daily note.
“However, this was not the case on Wednesday, when the yellow metal was able to maintain itself above the $1,800 mark because of a lower dollar index, which is floating around its one-month low,” the AvaTrade analyst wrote.
The dollar index was trading up 0.2% at 96.15, as measured by the ICE Dollar Index DXY, +0.05%, and bullion gained as the currency rose and bond yields edged lower, and prices of the debt higher, indicating that investors may be picking up safe-haven assets in the remaining days of 2021, with 2022 expected to present further uncertainty even if the omicron variant proves to be less damaging to the global economy.
“Gold is holding up all right considering the firmer US dollar and the bullish mood in equities,” wrote David Madden, market analyst at Equiti Capital, in a Thursday note.
“Since the [Federal Reserve’s] meeting in the middle of the month, the yellow metal has been largely pushing higher. While the US dollar remains below its recent peak, it is possible that gold might retest the $1,820 mark,” the analyst speculated. The Fed last met on Dec. 14-15 and it is expected that the central bank will raise interest rates, which currently stand at a range between 0% and 0.25%, three times next year after completing its asset purchases. The next meeting for the Fed is Jan. 25-26.
Meanwhile, March silver SIH22, +1.08% gained 20.2 cents, or 0.9%, to end at $23.06 an ounce, following a 1.1% decline on Wednesday.
Elsewhere on Comex, March copper HGH22, -0.60% lost a little over 2 cents, or 0.5%, to settle at $4.3925 a pound, after shedding 0.6% in the previous session.
The most-active April platinum PLJ22, -0.70% contract was trading $5.40, or 0.6%, lower to end at $964.60 an ounce, after falling 1% on Wednesday.
Palladium for March delivery PAH22, -1.18% declined by $3.80, or 0.2%, to settle at $1,983.20 an ounce, following a 0.7% decline a day ago.
Originally posted on Market Watch.