Gold prices pulled back on Tuesday, after briefly climbing to their highest intraday level in about three months following a cooler-than-expected reading on U.S. inflation.
Price action
-
Gold prices for December
GCZ22,
-0.10% GC00,
-0.10%
delivery fell $3.20, or 0.2%, to $1,773.70 per ounce on Comex. Prices had climbed to as high as $1,791.80 early Tuesday, the highest intraday level for a most-active contract since Aug. 17, FactSet data show. -
Silver prices for December
SIZ22,
-2.00% SI00,
-2.00%
delivery shed 27.3 cents, or 1.2%, to $21.84 per ounce after posting a gain of 2.1% on Monday. -
Palladium prices for December
PAZ22,
+1.84%
delivery rose $34.50, or 1.7%, to $2,074 per ounce, while platinum prices
PLF23,
-0.90%
for January delivery lost $2.30, or 0.2%, to $1,030.70 per ounce. -
Copper prices for December delivery
HGZ22,
-0.47%
shed 2.4 cent, or 0.6%, to $3.81 per pound.
What’s happening
Gold’s retreat from the highs Tuesday was due to “the dollar bouncing off its lows after plunging in the aftermath of another inflation surprise,” as the U.S. producer price index reading came in softer than expected, Fawad Razaqzada, market analyst at City Index and FOREX.com, told MarketWatch.
U.S. wholesale prices rose just 0.2% in October, a fourth straight soft reading that suggests inflation is on the wane after hitting a 40-year high earlier in the year. Economists polled by The Wall Street Journal had forecast a 0.4% gain.
However, some of the moves for the dollar have already unwound, suggesting the market is now looking for the Federal Reserve “to do the walking, having done some (dovish) talking,” said Razaqzada.
While the softer U.S. PPI data has further raised speculation about the Fed pivoting to a more dovish stance, “the fact that other central banks are likely to follow the footsteps of the Fed means the dollar will still hold some interest rate advantage over her rivals,” he said. “So, the greenback could easily come back after such a strong downward move, and this may undermine gold after its own very strong performance in recent days.”
The ICE U.S. Dollar Index
DXY,
was off 0.5% at 106.12 in Tuesday dealings, but traders more than 10% higher month to date.
Gold’s retreat on Tuesday also came on the back on profit taking and resistance to get above $1,800, as gold has rallied about $160 to $170 in a month, Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch.
“The next step for gold to go higher is any weakness in the U.S. dollar and strength in U.S. Treasurys, with a peak in the 10-year yield,” he said. “These are the two factors I will be watching through the rest of November for further insight into next steps for gold.”
