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Gold steadies as dollar bounce fizzles

Date Published: November 22, 2022

Gold futures ticked higher Tuesday, finding support as a sharp bounce by the U.S. dollar ran out of steam.

Price action
  • Gold for December delivery
    GC00,
    +0.17%

    GCZ22,
    +0.17%

    rose $9.20, or 0.5%, at $1,748.80 an ounce on Comex.

  • December silver
    SIZ22,
    +0.85%

    rose 42.3 cents, or 2%, to $21.295 an ounce.

  • January platinum
    PLF23,
    +1.35%

    was up $13.60, or 1.4%, at $1001.50 an ounce, while December palladium
    PAZ22,
    +0.57%

    rose $18, or 1%, to $1,871 an ounce.

  • December copper
    HGZ22,
    +1.50%

    gained 6.4 cents, or 1.8%, to trade at $3.64 a pound.

Market drivers

Gold slid on Monday, extending the previous week’s retreat, as the dollar bounced sharply higher. The ICE U.S. Dollar Index
DXY,
-0.41%
,
a measure of the currency against a basket of six major rivals, was off 0.4% after jumping nearly 1% on Monday.

A stronger dollar can be a weight on commodities priced in the unit, making them more expensive to users of other currencies.

“Though the latest cooling of U.S. inflation has dampened fears of rampant inflation and thus ever more pronounced rate hikes by the U.S. Federal Reserve, it is still clear that the central bank has not yet finished tightening its monetary policy. After all, at 7.7% inflation is still a long way off its 2% target,” wrote analysts at Commerzbank.

Moreover, a November rebound by gold, with the metal up 6.6% month to date, has been driven largely by short covering, they wrote, a factor that appears to have run its course with Commodity Futures Trading Commission data showing that speculative traders now carry net long positions in gold futures, the Commerzbank analysts said.

“We are sticking with our assessment that the gold price will only recover lastingly once an end to the rate hikes is in sight. This is likely to be the case in the first quarter of 2023,” they wrote.

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