Metals Stocks: Gold ends at nearly 2-week low to begin 2022
Gold futures declined on Monday to start the new year on the backfoot, with prices settling at their lowest in almost two weeks in the wake of rising stocks and Treasury rates.
“The gold market is fighting negative sentiment from gold’s 3.6% annual decline in 2021,” analysts at Zaner wrote in Monday’s newsletter.
“Unfortunately for the bull camp, U.S. Treasury yields remain high and could threaten silver and gold longs as the markets look ahead to this Friday’s nonfarm payroll report,” they said. “Expectations for this week’s monthly nonfarm payroll report project a gain of 400,000 jobs, which is nearly double the surprisingly negative reading from November.”
February gold GCG22, -1.46% fell $28.50, or 1.6%, to settle at $1,800.10 an ounce on Comex after tapping a low of $1,798.20. The settlement was the lowest for a most-active contract since Dec. 21, FactSet data show.
Last week, the metal rose 0.9%, leading to a 2.9% monthly climb, and prices advanced around 4% in the final three months of the year, FactSet data show. However, gold futures based on the most-active contract notched the sharpest yearly drop, down 3.6%, since the metal ended down over 10% in 2015.
February gold hasn’t been able to trade over its 400-day moving average of around $1,826.10, and that is led to a fall in prices, Chintan Karnani, director of research at Insignia Consultants, told MarketWatch.
The very low fatality rate and very low hospitalization rate due to the omicron variant of the coronavirus “will reduce safe haven demand for gold,” he said.
February gold would need to trade over its 200-day moving average of $1,806.40 on a daily closing basis “to be in a short-term bullish zone,” said Karnani. “Failure to do so can result in more sell and a renewed increase in short positions.”
For now, he expects “cautious optimism in gold.”
The slide for the precious metal, however, comes as a seasonally strong period of buying in precious metals is expected to commence, analysts said.
“The December-January period is historically very strong for bullion, which has gained in 8 out of the last 10 Januaries,” wrote Marios Hadjikyriacos, senior investment analyst at brokerage XM, in a Monday note. He pointed out that markets remained closed in the United Kingdom and Canada Monday, so trading volumes were expected to “thinner than normal.”
Metals markets were open on Friday on New Year’s Eve but some international markets remain closed in observance of the New Year’s Day holiday.
On Monday, U.S. stock benchmarks like the Dow Jones Industrial Average YM00, +0.36% DJIA, +0.47% and the S&P 500 index SPX, +0.45% traded higher, while the dollar was up 0.3% to start the year. Meanwhile, the 10-year Treasury note yield TMUBMUSD10Y, 1.628% topped 1.6% to touch the highest level since November.
A rise in yields for debt makes nonyielding precious metals less appealing compared against debt that offers a coupon, while a stronger buck can make dollar-priced bullion more expensive to overseas buyers.
Strength in the U.S. stock indexes “suggest low trader and investor risk aversion in the marketplace at present — and that’s bearish for the safe-haven metals,” said Jim Wyckoff, senior analyst at Kitco.com, in a daily note.
March silver SIH22, -1.91% declined by 54 cents, or 2.3%, at $22.81 an ounce.
On Friday, silver logged a weekly rise, up 1.8%, with a 2.4% monthly advance and a 5.9% gain for the quarter. However, gold’s sister metal posted a 11.5% yearly fall, marking its sharpest annual drop since 2014 when it fell 19.5%.
“While there is little risk aversion in the marketplace at present, some market analysts believe 2022 will be a rockier year for the stock markets, what with rising inflation, central banks reining in their heretofore easy money policies, and the globe still doing battle with the pandemic,” said Wyckoff. “There are also lingering geopolitical issues that could quickly move to the front burner of the marketplace, such as Russia’s troop build-up on its Ukrainian border, and China’s property market bubble that may be bursting.”
In other Comex dealings, March copper HGH22, -0.85% shed 0.9% to $4.422 a pound. April platinum PLJ22, -1.27% lost 1.3% to $954 an ounce and March palladium PAH22, -4.63% settled at $1,826 an ounce, down 4.5%.