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Metals Stocks: Gold slips as traders anticipate more central-bank interest rate hikes


Gold and silver prices declined on Tuesday with precious metals prices anchored near their September lows despite relative softness in the U.S. dollar over the past two weeks.

Price action

Gold futures

for December delivery fell $6.70, or 0.4%, to $1,657.30 per ounce on Comex.

December silver futures

traded at $18.715 per ounce, down 1.4 cents, or nearly 0.1%.

Palladium futures

for December advanced $26.10, or 1.3%, to $2,026 per ounce, while January platinum futures

gained $1.70, or 0.2%, to $915.30.

December copper

retreated by 5 cents, or 1.5%, to $3.366 per pound.

What’s happening

The path of least resistance for gold “points south” with Federal Reserve rate hike expectations and rising Treasury yields capping upside gains, said Lukman Otunuga, manager, market analysis, at FXTM.

“Should prices slip back below $1,640, this could open a path toward $1,615 and $1,600,” he said in emailed commentary. Still, a break back above $1.675 would encourage bulls to target the psychological $1,700 level.”

Precious metals strategists pointed out that gold and silver haven’t derived much benefit from a softer U.S. dollar in recent weeks as traders have shifted their focus to the outlook for interest rates.

As a result, gold has weakened many currencies, including the euro, as precious-metals analysts from Commerzbank pointed out in a note to clients.

“The gold price has hardly profited at all from the noticeably weaker U.S. dollar of late. Instead, the price is trading at a good $1,650 per troy ounce, only somewhat above the low it posted on Friday,” the team said.

But with both the Fed and the European Central Bank hinting at more aggressive interest rate hikes, they expect pressure will continue to mount on gold and silver.

“The relative weakness of gold is probably attributable to the still high and virtually unchanged rate hike expectations, which have been fuelled by persistently hawkish comments by Fed and ECB representatives,” they said.

The ICE U.S. Dollar Index
a gauge of the greenback’s strength against a basket of rivals, rose 0.2% to 112.22, putting pressure on dollar-denominated precious metals prices.

Looking ahead, however, the “soaring costs of servicing the federal debt, which will be updated with the Q3 GDP calculation on October 27, will put considerable pressure on the Fed to at least pause” interest-rate hikes, Brien Lundin, editor of Gold Newsletter, told MarketWatch, “And in turn, this would be bullish for gold.”

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