Metals Stocks: Gold futures fall back below the key $1,800 mark

Metals Stocks: Gold futures fall back below the key $1,800 mark

Gold futures declined on Tuesday, failing to hold above $1,800 an ounce a day after settling above that price level for the first time since mid-September.

Profit taking, along with a slight gain in the U.S. dollar and gold’s fall below the key $1,800 level, led to Tuesday’s gold-price selloff, Chintan Karnani, director of research at Insignia Consultants, told MarketWatch.

The dollar, as measured by the ICE U.S. Dollar index DXY, +0.12%, was up 0.1% after the Conference Board said Tuesday that the index of U.S. consumer confidence rose to 113.8 in October from a revised 109.8 in September.

“The threshold price is $1,800 for gold to continue its short term rally,” said Karnani.

In Tuesday dealings, December gold GCZ21, -1.05% GC00, -1.05%  declined by $21, or 1.2%, to $1,785.80 an ounce. That followed a 0.6% climb Monday, which brought prices for the most active contract to its highest settlement since Sept. 14, according to FactSet data.

December silver SIZ21, -2.16% traded at $24.01 an ounce, down 58.7 cents, or 2.4%, a day after posting a 0.6% gain.

Bullion has been mostly supported by fears about persistent inflation around the world, with the precious metal viewed as a hedge against intensifying pricing pressures. However, expectations that the Federal Reserve will be forced to lift interest rates, which currently stand at a range between 0% and 0.25%, faster than earlier anticipated is likely to limit rallies for precious metals.

The Fed is slated to hold its two-day policy meeting Nov. 2-3, when it is widely expected to announce a tapering of bond purchases that were put in place during the worst of disruptions to financial markets sparked by the COVID-19 pandemic. Investors will be looking for any indication of the pace of that reduction in purchases as a signal of how rapidly the central bank might move to normalize interest rates.

“Gold prices jumped above the $1,800 level after yields on short-term Treasury bonds dropped after Jerome Powell, chairman of the Federal Reserve, indicated [on Friday] that inflation could persist longer than expected,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a research note.

“This update fuelled expectations of a sooner than expected interest rate hike to check surging commodity prices,” he wrote.

Also on Comex Tuesday, December copper HGZ21, -0.12% fell by 0.2% to $4.512 a pound.

January platinum PLF22, -3.11% dropped 3.1% to $1,031 an ounce and December palladium PAZ21, -3.79% traded at $2,010 an ounce, down 1.9%.