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Metals Stocks: Gold futures end lower, but mark the first monthly gain since March

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Gold futures finished Wednesday with a loss, with prices settling just as Federal Reserve Chairman Jerome Powell presented his speech to the Brookings Institution.

Prices for the precious metal, however, marked their first monthly gain since March on the back of overall weakness for month in the U.S. dollar and Treasury yields.

Price action

Gold prices for February delivery
GC00,
+1.00%

GCG23,
+1.00%

fell $3.80, or 0.2%, to settle at $1,759.90 per ounce on Comex. Prices based on the most active contract posted a monthly gain of 7.3%, their first since March and largest monthly percentage rise since May 2021, according to Dow Jones Market Data.

Silver prices for March delivery
SIH23,
+4.10%

rose 34 cents, or 1.6%, to $21.781 per ounce, ending nearly 14% higher for the month.

January platinum
PLF23,
+4.06%

was up $30.70, or 3%, at $1,039.30 an ounce, for a monthly rise of nearly 11.7%, while March palladium
PAH23,
+3.39%

climbed $32.10, or nearly 1.8%, to $1,866 an ounce, edging up by 1.2% for the month.

Copper for March delivery
HGH23,
+3.98%

rose 10 cents, or 2.7%, to settle at $3.738 per pound, ending with a 10.8% monthly rise.

Market drivers

Prices of commodities including gold, copper and crude oil had spent much of Wednesday’s session on the rise as protests in China have prompted authorities there to ease some of their COVID-19 restrictions slightly, market analysts said.

Gold prices, however, moved lower by Wednesday’s settlement, which came just as Powell presented his speech at the Brookings Institution.

Powell indicated that the central bank may decide to raise interest rates at a slower pace at its next policy meeting, but he also said the ultimate level of rates would have to be higher than was thought a few months ago.

“History cautions strongly against prematurely loosening policy,” Powell warned.

U.S. data released Wednesday had shown the nation’s economy grew at an annual 2.9% pace in the third quarter, up from a 2.6% rate of growth in the preliminary reading issued last month.

Monthly move

For the month of November, gold prices found support from a “significantly weaker” U.S. dollar, and a “notably lower” 10-year Treasury yield, Jeff Klearman, portfolio manager at GraniteShares, which runs the GraniteShares Gold Trust
BAR,
+1.01%
,
told MarketWatch.

The 10-year Treasury note yield
TMUBMUSD10Y,
3.693%

was down by 9.1% this month. The ICE U.S. Dollar Index
DXY,
-0.74%
,
a measure of the currency’s strength against a basket of rivals, was down 0.5% at 106.29 in Wednesday dealings, and trades around 4.7% lower for the month. Weakness in the dollar tends to decrease the opportunity costs for investors considering dollar-priced gold as an option versus other perceived havens.

Declines in the dollar and 10-year Treasury yield can be “attributed to growing expectations of a less aggressive Fed going forward, fueled by lower (better)-than-expected PPI and CPI releases and less-hawkish statements in the FOMC minutes released last week,” said Klearman.

Meanwhile, “increased concerns surrounding the Russia-Ukraine war…, weak Chinese economic activity powered by China’s zero-COVID policy, as well as recent protests by Chinese citizens, also have contributed to gold’s rise in price,” he said.

Silver has outperformed gold this month, driven by the same factors affecting gold, but silver tends to be more volatile than gold, rising and falling at faster rates, said Klearman. Also, industrial and physical investment demand has increased and is expected to further increase, while mining output is not forecasted to increase, he said.

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