Metals Stocks: Gold scores first gain in 4 sessions

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Markets/commodities reporter

Gold futures finished slightly higher Wednesday, a day after the metal got pummeled below $1,300 an ounce to post its lowest settlement of the year on the back of a jolt higher by U.S. government bond yields and a resurgent dollar.

The recent jump in Treasury yields and strength in the greenback had served to undercut appetite for precious metals in recent sessions.

June gold GCM8, +0.07% edged up by $1.20, or just under 0.1%, to settle at $1,291.50 an ounce. On Tuesday, gold dropped by more than 2% to $1,290.30, the lowest settlement for a most-active contract since late December, according to FactSet data. Tuesday’s brisk retreat for the yellow metal also pushed it below its 200-day moving average, which stood at $1,307.80, for the first time since late December.

On Wednesday, the 10-year Treasury note TMUBMUSD10Y, +0.51%  yield was at about 3.08%, pulling back from its highest levels since 2011, while the U.S. dollar, as measured by the ICE U.S. Dollar Index DXY, +0.12% a measure of a half-dozen rival currencies, was up 0.1% at 93.33, after trading as high as 93.63—its highest level of 2018, according to FactSet data.

Higher yields dent demand for nonyielding bullion and a strengthening greenback makes commodities priced in the currency, like gold, more expensive to buyers using other monetary units.

“If gold gets below $1,280/oz, that opens the door to massive technical selling, possibly quickly to the $1,230’s if not lower later this year,” said Jason Rotman, principal with Lido Isle Advisors. “Gold yields nothing, and in a rising rate environment, yielding bonds look way more attractive.”

Expectations for healthy economic growth, which might prompt the Federal Reserve to take an aggressive tack in normalizing interest rates were seen as part of the story, following supportive data in retail sales and a reading of U.S. manufacturing, the Empire State index, that sparked Tuesday’s gold price plunge.

Data Wednesday showed a rise of 0.7% in U.S. industrial production. That was the third straight month of gains.

“The dollar is strengthening and the growing expectation for a rise in U.S. rates is hitting gold prices, pushing down the yellow metal. Today’s chart is particularly significant, as the precious metal has broken the support area of $1,300,” said Carlo Alberto De Casa, chief analyst at ActivTrades.

“This, of course, is representative of a generally weakening scenario. After more than 4 months in the tight lateral range between $1,300 and $1,350, gold is going in a new direction,” he said.

Among other metals, July silver SIN8, +0.74% settled at $16.371 an ounce, up 0.6%, after tumbling 2.3% on Tuesday.

Industrial metal copper for July delivery HGN8, +0.61% meanwhile, rose 0.5% to $3.071 a pound. July platinum PLN8, -0.56% shed 0.8% to $889.80 an ounce, the lowest finish year to date, while June palladium PAM8, -0.29% fell less than 0.1% to $982.50 an ounce.

In exchange-traded action, the SPDR Gold Shares GLD, -0.07%  added less than 0.1%, while the iShares Silver Trust SLV, +0.62% climbed 0.8%. The VanEck Vectors Gold Miners GDX, -0.02% rose 0.2%.

—Rachel Koning Beals contributed to this report

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