Metals Stocks: Gold heads higher for a ninth straight session, ahead of Fed decision

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Gold futures were modestly higher Wednesday, poised to tally a ninth gain in a row after scoring a record settlement and intraday high a day earlier, as investors await the outcome of a Federal Reserve policy meeting.

In the weeks since the last Fed meeting, “the number of new [COVID-19] cases in the U.S. has soared,” many states and local governments have re-imposed restrictions on personal movement, and the number of new claimants for unemployment benefits has remained stuck” at more than one million, said Agathe Demarais, global forecasting director at The Economist Intelligence Unit, in emailed commentary.

The Fed concludes a two-day policy meeting later Wednesday, with a statement due at 2 p.m. Eastern, after gold futures settle for the session, followed by Chairman Jerome Powell’s news conference at 2:30 p.m. Economists and investors don’t expect any major tweaks to policy, but look for Powell to maintain a dovish tone, signaling the central bank is committed to maintaining monetary loose policy and is prepared to do more if needed to avert a further downturn.

Read: The Fed won’t be happy with how the economy is performing, but isn’t perturbed enough to take aggressive action

“In June, the Fed struck a downbeat tone, warning that the chances of a rapid recovery in the second half of the year and a prolonged slump were roughly even,” Demarais said. “Given the developments since then, the prospect of the Fed becoming gloomier is still high.”

Against this backdrop, gold for August delivery GC00, +0.21% GCQ20, +0.21% rose $2.10, or 0.1%, to $1,946.70 an ounce on Comex. Gold ended at a record $1,944.60 an ounce on Tuesday. It looks to notch a ninth straight session gain, the longest such streak since the 10-session climb ended in January.

“The rapid recovery makes it clear that the market wants to push prices higher, so a renewed bid for the record high is probable,” said Carsten Fritsch, analyst at Commerzbank, in a note.

Powell “is likely to provide a dovish outlook at the virtual press conference after the meeting. He may also comment on plans to anchor long-term interest rates at a low level by adjusting the forward guidance and possibly conducting yield curve control,” Fritsch said. “This would cement the negative real interest rates, in which case new record highs for gold and an increase above $2,000 per troy ounce would only be a question of time.”

Meanwhile, after settling at the highest for a most-active contract early this week, September silver SIU20, -0.22% was down 2 cents, or 0.08%, at $24.28 an ounce. Prices, however, trade more than 30% higher year to date.

Silver has rallied “for many of the reasons that gold is, in that they are both precious metals that are sought as a refuge in times of economic uncertainty and financial market volatility,” said Jordan Eliseo, Manager, Listed Products and Investment Research at The Perth Mint.

“Unlike gold which is seen more as a monetary metal by the market, silver is also widely used in industry, which is one of the reasons why price movements (both to the upside and downside) can often be more volatile than the movements seen in gold itself,” he told MarketWatch.

Looking ahead, “there are no guarantees history will repeat itself, but a growing number of investors are positioning their portfolios to benefit should silver outperform gold in the years to come, as it has over the past three months,” said Eliseo.

Among other metals traded on Comex Wednesday, September copper HGU20, shed 0.5% to $2.9035 a pound. October platinum PLV20, -2.96% lost 3% to $956.40 an ounce and September palladium PAU20, -6.35% fell 7.2% to $2,195.50 an ounce.