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Metals Stocks: Gold futures posts biggest session gain in nearly 3 weeks

Gold futures logged their biggest one-day gain in almost three weeks on Monday, buoyed by inflation concerns, after posting their strongest one-week gain since mid-November.

“My sense is the inflation narrative is starting to take over from the [U.S. dollar] and Treasury yields as the key driver — and hence the strong showing” for gold, Ross Norman, chief executive officer at Metals Daily, told MarketWatch.

Gold has benefited from the sentiment that the Federal Reserve is “getting seriously behind the curve and the chance of a policy error are manifestly higher,” he said.

Gold has two key technical targets, he said. The first is $1,815, which it settled above today, and the next is $1,835, he said. “After that, the market has scope to rally much higher. It just needs to get exit velocity, something that it has failed to achieve for over a year now.”

April gold GCJ22, +0.92% GC00, +0.92% rose $14, or 0.8%, to settle at $1,821.80 an ounce — the biggest one-day point and percentage gain for a most-active contract since Jan. 19 and highest settlement since Jan. 26, FactSet data show. Prices saw a gain of 1.2% last week, which was the sharpest such advance for a most-active contract since a 2.9% rise in the week ended Nov. 12.

Prices for the precious metal have climbed despite better-than-expected monthly data on U.S. employment.

Data on Friday showed the U.S. added 467,000 jobs in January, with economists polled by The Wall Street Journal forecasting 150,000 new jobs and some predicting job losses on the month due to the impact of omicron, the variant of the coronavirus that causes COVID-19.

Unfortunately for the bull camp on gold, “surging jobs figures from the U.S. were seen as a development capable of shifting the U.S. Fed into action next month instead of the trade increasing the probability of inflationary price action,” said analysts at Zaner in a Monday note.

The positive results may support a faster pace of interest-rate increases by the Fed, with the market pricing in as many as four rate increases this year to benchmark federal funds rates, which currently stand at a range between 0% and 0.25%.

Gold’s medium-term direction will be governed by how quickly the Fed “decides to implement the more hawkish strategy officials spoke more explicitly about last week,” wrote Rupert Rowling, market analyst at Kinesis Money, in a Monday research note.

Any increases will likely strengthen the U.S. dollar and may place dollar-priced gold under pressure.

The dollar DXY, -0.04% was up slightly at around 95.51, while the 10-year Treasury note yield TMUBMUSD10Y, 1.912% was down at 1.91%. A stronger dollar can undercut appetite for buck-priced bullion among overseas buyers. Strength in Treasury yields, which are higher month to date, can lift the opportunity costs of owning nonyielding assets over government debt.

Concerns about pricing pressures will add to interest in a report on consumer prices due Thursday, the consumer-price index.

Meanwhile, March silver  SIH22, +2.80% tacked on 60 cents, or 2.7%, to $23.076 an ounce, after gold’s sister metal put in a 0.8% weekly advance on Friday.

March copper HGH22, -0.08% lost 0.6% to $4.463 a pound. April platinum PLJ22, -0.24% shed 0.4% to $1,020 an ounce and March palladium PAH22, -1.32% settled at $2,260.10 an ounce, down 1.3%.

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