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Metals Stocks: Gold ends lower, a day after prices settle at their highest in nearly 2 weeks

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Gold futures settled lower on Thursday, after settling to their highest price in nearly two weeks in the previous session — when a pullback in the U.S. dollar gave bulls some breathing room.

Price action

Gold for December delivery
GC00,
-0.30%

GCZ22,
-0.30%

was down $3.60, or 0.2%, to settle at $1,665.60 an ounce on Comex. That followed gain of 0.7% on Wednesday, when it settled at $1,669.20, the highest most-active contract finish since Oct. 13, FactSet data show.

December silver
SIZ22,
-0.11%

rose a penny, or less than 0.1%, to $19.494 an ounce.

January platinum
PLF23,
+0.45%

added 0.5% to $967.40 an ounce, while December palladium
PAZ22,
-1.50%

lost 1.1% to $1,938.20 an ounce.

December copper
HGZ22,
-0.54%

fell 0.7% to $3.5195 an ounce.

Market drivers

Gold futures on Thursday were pressured by “a solid rebound in the U.S. dollar index and some upbeat U.S. economic data,” said Jim Wyckoff, senior analyst at Kitco.com, in daily commentary.

The ICE U.S. Dollar Index
DXY,
+0.70%
,
a measure of the currency against a basket of six major rivals, was up nearly 0.7% Thursday, but remained down 1.4% for the week. The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.960%
,
however, fell around 7 basis points to 3.9505%.

A stronger dollar can be a weight on commodities priced in the unit, making them more expensive to users of other currencies. A climb in bond yields, which had recently touched their highest level in more than a decade, can raise the opportunity cost of holding nonyielding assets.

Loses for gold came as U.S. GDP data released Thursday showed that the U.S. economy grew at an annual 2.6% pace in the third quarter, rebounding from two straight declines in the first half of the year.

Gold saw prices drop after a better-than-expected U.S. GDP number, with the thinking being that a more robust growth number would strengthen the Federal Reserve’s “resolve to keep hiking” interest rates, said Brien Lundin, editor of Gold Newsletter. However, gold’s price recovered some of its losses after that more bearish reaction, he said. Futures prices had traded as low as $1,658.50.

The Fed has been rapidly raising interest rates to try to tame high inflation. Precious metals, like gold, tend to attract buyers in a low interest-rate climate.

Perhaps investors are “considering another important number buried within the Q3 GDP report: the latest estimate of annualized federal interest payments,” said Lundin. This rose to $736.5 billion, “by far a new record, and I believe it’s going to hit $1 trillion very soon.”

Read: GDP looked great for the U.S. economy, but it really wasn’t

Lundin said he believes the “spiraling cost of servicing the federal debt will be a roadblock in the way of the Fed’s rate-hike campaign.”

“The “spiraling cost of servicing the federal debt will be a roadblock in the way of the Fed’s rate-hike campaign.” ”

— Brien Lundin, Gold Newsletter

“With the federal debt at these levels (and headed higher), we simply can’t tolerate interest rates at current levels or higher,” he said. “Today’s debt burden precludes rates that are simply positive on a real basis. Negative real rates, which are necessary when debt is so high, are extremely positive for precious metals and other tangible assets.”

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