Gold prices end higher after 7th straight monthly loss

Gold prices ended higher Tuesday, recovering some of their recent losses, after posting a seventh straight monthly decline in October.

Price action
  • Gold for December delivery

    rose $9, or nearly 0.6%, to settle at $1,649.70 an ounce on Comex. The yellow metal suffered its seventh straight monthly fall in October based on most actively traded contracts, marking its longest such streak since 1982.

  • December silver
    rose 55 cents, or 2.9%, to $19.667 an ounce.

  • January platinum
    rose 2.2% to $950.50 an ounce, while December palladium
    gained 2.5% to $1,877 an ounce.

  • December copper
    added 2.9% at $3.4725 a pound.

Market drivers

Gold drew strength Tuesday from earlier weakness in the dollar and falling Treasury yields as investors braced themselves for the Federal Reserve meeting, said Lukman Otunuga, manager, market analysis, at FXTM.

Treasury yields were mostly moving lower Tuesday, while the ICE U.S. Dollar Index
was little changed at 111.553 after trading as low as 110.719.

Year to date, however, gold prices have declined as the U.S. central bank has aggressively raised interest rates in its bid to squelch inflation, driving up Treasury yields and the U.S. dollar. Rising yields raise the opportunity cost of holding nonyielding assets like gold, while a stronger dollar makes commodities priced in the unit more expensive to users of other currencies.

Although the Fed is “widely expected to raise rates, gold could come out of this meeting smiling if the Fed hints of a slowdown in monetary policy in the future,” said Otunuga, in market commentary.

Although the Fed is “widely expected to raise rates, gold could come out of this meeting smiling if the Fed hints of a slowdown in monetary policy in the future.”

— Lukman Otunuga, FXTM

The Fed is widely expected to deliver another supersize 75 basis point, or 0.75 percentage point, rate increase when it concludes a two-day policy meeting Wednesday. But investors will be looking to remarks by Fed Chair Jerome Powell for clues to the size of a December rate move, with expectations running high that he may hint at smaller increases ahead.

See: What Fed Chair Powell can say to keep the stock-market rally going — or kill it

“Given how such a pivot could provide more room for gold bugs to fight back, prices would head north in the near term,” Otunuga said.

Bullish reversal?

Gold retreated to $1,633 by the start of this month, close to the lows of September and October, but has gained about 1% to surpass $1,650, said Alex Kuptsikevich, senior market analyst at FxPro, in emailed comments. “We saw a similar buying spree the month before, and such buying activity looks like a reversal to the upside.”

“However, in the current circumstances, it is better to wait for the price to surpass $1,700, confirming a bullish reversal,” he said.

“While central banks are signaling one after the other that they are decelerating their rate hikes, gold is enjoying ‘buying the dip’ behavior, as some investors see the current prices at the bear market’s edge (-20% of the peak) as attractive for buying in the mid-to-long term,” he wrote.

Meanwhile, in a report released late Monday, the World Gold Council said global gold demand, excluding over-the-counter activity, rose 28% year on year in the third quarter to 1,181 metric tons, even though global investment demand was down 47% year on year at 124 metric tons.

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