Metals Stocks: Gold prices post modest gain, a day after settling at a 3-week low

Gold prices traded lower on Thursday as the U.S. dollar climbed following an interest-rate hike and statement from the European Central Bank.

Investors also looked to some fresh U.S. inflation data for hints on the U.S. Federal Reserve’s interest-rate decision, ahead of the central bank’s meeting next week.

Price action

  • Gold futures for December delivery
    declined by $6.30, or 0.3%, to $1,926.20 per ounce on Comex. On Wednesday, the most-active contract marked its lowest finish since Aug. 22, according to Dow Jones Market Data.

  • Silver futures for December
    shed 36.1 cents, or 1.6%, to $22.82 per ounce.

  • Platinum for October delivery
    gained $4.50, or 0.5%, to $909.70 per ounce, while palladium for December delivery
    rose by $5.20, or 0.4%, to $1,266 per ounce.

  • Copper for December delivery
    rose 1.3 cents, or 0.3%, to $3.806 per pound.

Market drivers

Traders described the ECB’s 25 basis point interest rate hike on Thursday as “dovish,” potentially boosting the appeal of gold by suggesting that global bond yields may not need to rise much higher.

“The ECB hiked rates 25bps today, taking the deposit rate to 4.00% in what can only be characterised as a dovish hike,” said a team of macro analysts at TD Securities. “This is a clear sign that absent any further notable upside surprises to inflation and its drivers, they are done hiking rates.”

The U.S. dollar caught a boost from the ECB hike as the euro
fell. The ICE U.S. Dollar Index
was up 0.3% at 105.07, pressuring dollar-denominated gold prices.

Also read: Here’s what the gold-silver price ratio tells us about silver

U.S. August retail sales and wholesale producer prices were released Thursday morning. Retail sales in the U.S. rose 0.6% in August, while the producer-price index, a gauge of wholesale-price growth, rose 0.7%.

That data followed a reading on consumer prices on Wednesday that revealed a rise of 0.6% in August — the biggest increase in 14 months.

Gold prices remained on a “downward trajectory overall” as traders continue to evaluate the possible outcomes of the upcoming Fed meeting,” said Denys Peleshok, head of Asia at CPT Markets.

“Higher than expected U.S. inflation data has fueled more uncertainty about the direction of monetary policy,” he said in a market note. While the Fed is expected to maintain its policy interest rates unchanged in next week’s meeting, “elevated inflationary pressures could leave some concerns about another hike this year.”

The potential for the central bank to keep interest rates “high for longer” could continue to weigh on gold prices, which have been declining since their peak in May this year,” said Peleshok.

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