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Metals Stocks: Gold ends higher, holds above $1,700 an ounce as dollar weakens

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Gold futures settled modestly higher on Tuesday, holding ground above $1,700 an ounce as the U.S. dollar continued to weaken against major currencies, but a slight rise in U.S. Treasury yields kept price gains in check.

Price action

Gold futures for August delivery
GCQ22,
-0.02%

GC00,
-0.02%

climbed 50 cents, or less than 0.1%, to settle at $1,710.70 an ounce.

Silver futures
SIU22,
-0.82%

SI00,
-0.82%

for September delivery lost 13 cents, or 0.7%, to $18.713 an ounce.

September copper
HGU22,
-1.81%

fell 5 cents, or 1.6%, to $3.291 per pound.

October platinum
PLV22,
+0.47%

rose $2.90, or 0.3%, to $858.90 per ounce, while palladium
PAU22,
+0.62%

for September delivery climbed $5.10, or 0.3%, to $1,854.20 per ounce.

What analysts are saying

“A big drop in the U.S. dollar index this week is limiting selling interest in the precious metals,” said Jim Wyckoff, senior analyst at Kitco.com, in a Tuesday note. “However, rising U.S. Treasury bond yields this week and a wobbly crude oil market are squelching the bulls.”

The ICE U.S. Dollar Index
DXY,
-0.61%
,
a gauge of the dollar’s strength against a basket of rivals, was down 0.7% in Tuesday dealings, while the yield on 10-year Treasurys
TMUBMUSD10Y,
3.016%

was up 4 points at 3.006%.

The recent move towards dollar parity with the euro has been a “near term headwind for gold,” Michael Cuggino, president and portfolio manager of the Permanent Portfolio Family of Funds, told MarketWatch. “This results primarily from a desire to own U.S. assets overall given current global macro uncertainties.”

The euro
EURUSD,
+0.83%
,
which last week hit a 20-year low below parity with the dollar, rose 0.9% to $1.0238 in Tuesday trading.

Meanwhile, the Federal Reserve’s hawkish commentary and actions to fight inflation have been “more aggressive than their European counterparts who, fearing a broader and deeper recession than may occur in the U.S., have been hesitant to raise rates at the same pace,” said Cuggino. 

“We believe this is a short-term condition and gold will trend higher as the dollar likely weakens as the European Central Bank (and others) begins to raise interest rates more in line with the Fed,” he said. The ECB will hold its next policy meeting on Thursday. Investors may also “again begin to focus on gold’s alternative currency and capital preservation properties verses just an interest rate story.”

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