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Metals Stocks: Gold touches a fresh 8-month high on China reopening hopes

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Gold futures touched a fresh eight-month high Wednesday as traders bet that China’s decision to drop COVID-19 restrictions on its economy would continue to boost prices of precious and industrial metals.

Price action

Gold futures for February delivery
GC00,
-0.20%

GCG23,
-0.20%

traded as high as $1,890.90 an ounce, the highest intraday price for a most-active contract since May, FactSet data show. It was last at $1,877.70, up $1.20, or nearly 0.1%.

March silver
SI00,
-1.14%

SIH23,
-1.14%

declined by 7 cents, or 0.2%, to $23.595 per ounce.

Palladium for March
PAH23,
-1.62%

advanced $17.80, or 1%, to $1,759.50 per ounce, while platinum for April
PLJ23,
+0.34%

gained $15.10, or 1.4%, to $1,103.60 per ounce.

March copper
HGH23,
+2.26%

rose by 8.4 cents, or 2.1%, to $4.161 per pound, trading at the highest prices for the industrial metal since June.

Market drivers

The reopening of China’s economy after the lifting of COVID-related restrictions has helped push demand for industrial metals and precious metals higher.

Copper futures traded at their highest levels since June and gold on Wednesday touched its highest intraday level since May.

The rise in gold prices has also been supported by a fall in the U.S. dollar against major currencies since last November as U.S. bond yields have eased.

See: U.S. dollar on the verge of first ‘death cross’ since 2020 as rally unravels

Jim Wyckoff, senior analyst at Kitco.com, said, “Ideas of better economic growth in China are supporting metals prices on notions of increased demand,” in a note to clients published Wednesday.

Traders were also “optimistic” about the Federal Reserve’s monetary policy and believed that the central bank is likely to “adopt a less hawkish one,” said Naeem Aslam, chief market analyst at AvaTrade, even as Fed Chairman Jerome Powell, speaking Sweden Tuesday, didn’t drop any big hinds about Fed policy.

Looking ahead, the “most important wild card” is the U.S. CPI inflation data, due out Thursday, he said. “If the number doesn’t show satisfactory performance, we could see the dollar index soaring on the back of that number, which could easily take away the shine from the gold prices.”

Whether or not the U.S. dollar continues to weaken will help to decide whether dollar-denominated prices of gold and silver have further to climb.

“Gold could be one of the biggest winners and we’d expect strength in commodities off the weaker dollar,” authors at Sevens Report Research said.

The ICE U.S. Dollar Index
DXY,
+0.06%
,
a gauge of the buck’s strength against its main rivals, was down nearly 0.1%, to 103.179 in Wednesday dealings, trading 0.7% lower for the week so far.

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