Stock Market

Gold prices settle at lowest in a week on ‘hawkish Fed speak’ – News Opener

Gold futures declined on Thursday, with strength in the U.S. dollar and Treasury yields pulling prices to their lowest settlement in a week, after St. Louis Fed President James Bullard said higher interest rates are needed to bring inflation down.

Price action
  • Gold prices for December delivery
    GC00,
    -0.66%

    GCZ22,
    -0.66%

    lost $12.80, or 0.7%, to settle at $1,763 per ounce on Comex. That was the lowest finish for a most-active contract since Nov. 10, FactSet data show.

  • Silver prices for December delivery
    SIZ22,
    -2.36%

    SI00,
    -2.36%

    fell 55 cents, or nearly 2.6%, at $20.975 an ounce.

  • Palladium prices for December
    PAZ22,
    -3.52%

    delivery lost 3.4% to end at $2,010 per ounce, while platinum prices for January delivery
    PLF23,
    -2.41%

    fell 2.4% to $991.50 per ounce.

  • Copper prices for December
    HGZ22,
    -2.19%

    delivery retreated by 9 cents, or 2.3%, to $3.688 per pound.

What’s happening

Gold prices “got beat up after a round of hawkish Fed speak reminded investors that the risks of the Fed taking rates above 5% are clearly there,” said Edward Moya, senior market analyst at OANDA.

St. Louis Fed President Bullard on Thursday outlined in a presentation his view that the Federal Reserve’s benchmark interest rate may need to rise as high as 7% to put downward pressure on inflation.

Bullard’s comments that the policy rate is not yet sufficiently restrictive is a “big reminder that we need to see the labor market weaken significantly before we can price in the end of their tightening cycle,” said Moya.

“A top has been put in place with gold and prices could soften towards the $1,750 level,” he added.

Adam Koos, president of Libertas Wealth Management Group, told MarketWatch Thursday that “gold prices were smothered,” even as the Philadelphia Federal Reserve said Thursday that its gauge of regional business activity sank to negative 19.4 in November from negative 8.7 in the prior month.

The reading was down more than expected, so “it’s a pretty disappointing read,” said Koos.

However, “rates are popping…and while the U.S. dollar has been clobbered this past couple of months, we’re seeing a small — and what could turn into a larger — bounce in the dollar as well,” he said.

The ICE U.S. Dollar index
DXY,
+0.36%

was up 0.4% at 106.65 in Thursday dealings, while the 10-year Treasury yield note
TMUBMUSD10Y,
3.778%

added nearly 8 points to 3.7722%.

“It’s going to be tough to see an immediate movement northward in the yellow metal, unless the short-term trends (or bounces) in these two factors come into their own version of headwind,” said Koos.

Meanwhile, Michael Burry, of “Big Short” fame, who is hedge-fund manager at Scion Asset Management, said it’s time to buy gold, according to news reports.

Burry cited the crypto contagion risk following the FTX collapse, Kitco reported Wednesday afternoon. The reported said Burry made comments in a tweet that said: “Long thought that the time for gold would be when crypto scandals merge into contagion.” The tweet has been deleted, as the hedge-fund manager is known to delete his tweets shortly after posting them, the report said.

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