Metals Stocks: Gold prices shake off early losses to end higher as U.S. inflation data looms

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Gold shook off early Tuesday losses to head higher, supported by a retreat in the U.S. dollar, despite anxieties about further interest rate rises by the Federal Reserve in the face of high inflation.

Price action
  • Gold for December delivery

    rose $10.70, or 0.6%, to trade at $1,685.90 per ounce on Comex after touching a low at $1,667.50. Prices for the most-active contract had touched their lowest intraday level since Oct. 3, FactSet data show.

  • December silver

    shed 7 cents, or 0.4%, to $19.545 per ounce after finishing at its lowest level since since Sept. 30 on Monday.

  • December palladium futures

    fell by $13.40, or 0.6%, to $2,154.50 per ounce, while January platinum

    traded at $896.20 per ounce, up 40 cents.

  • December copper futures

    added 2.5 cents, or 0.7%, to $3.455 per pound.

What’s happening

“Where gold concludes this week will most likely be influenced by the U.S. inflation data on Thursday,” said Lukman Otunuga, manager, market analysis at FXTM, in market commentary.

“A red-hot CPI report will almost certainly reinforce aggressive rate hike bets, ultimately boosting the dollar and Treasury yields — at gold’s peril,” he said. “Such a development may drag the precious metal towards $1,655, $1,615, and $1,600.”

However, “an inflation report that misses expectations could offer space for gold bulls to fight back, opening a path back toward the psychological $1,700 level,” said Otunuga.

Gold prices found support Tuesday, giving up earlier losses, as the U.S. dollar pulled back, with the ICE U.S. Dollar index

down 0.3% at 112.778. Both gold and silver had posted losses on Friday and Monday.

Craig Erlam, a senior market strategist at OANDA, said he wasn’t surprised to see the rally fizzle over the past week though.

But now that their latest advance has “well and truly wilted,” Erlam wonders how much lower the precious metal will go in the near term as markets brace for the U.S. inflation data and the next Federal Reserve interest-rate hike in November.

“Key levels (in gold) below include $1,640 and $1,620, with $1,600 then the one to watch. If it does manage a recovery, then $1,685-1,690 looks interesting as it’s a level it has repeatedly rotated around in recent months,” Erlam said.

The next Federal Reserve policy meeting on November 2-3.