Metals Stocks: Gold settles at 10-week high as soft dollar spurs rally in metals

Gold futures settled higher for a sixth straight session on Thursday, pushing prices for the yellow metal to the highest finish in about 10 weeks as the U.S. dollar extended a streak of weakness with one day of trading left in 2017.

Copper, fueled by hopes for strong 2018 demand from top consumer China, also extended its run of gains to hold around four-year highs.

Read: Take off the bitcoin blinders, here are the big investments to watch for 2018

February gold GCG8, +0.39% the most active contract on Comex, rose $5.80, or 0.5%, to close at $1,297.20 an ounce, marking its highest close since Oct. 16, according to FactSet data.

Gold futures are headed for a gain of more than 12% this year, although that performance pales next to the 20%-to-30% gain for the Dow Jones Industrial Average DJIA, +0.17%  and the Nasdaq Composite Index COMP, +0.01% as risk-on sentiment dominated the year.

The dollar slipped to its lowest level in about three months as the ICE U.S. Dollar Index lost 0.5% on Thursday to 92.58, representing its lowest level since late September. The index measures the buck against a basket of a half-dozen rivals. A weaker dollar tends to provide a boost to dollar-pegged commodities, making them more attractive to users of weaker monetary units.

The gold-focused exchange-traded SPDR Gold Trust GLD, +0.50%  rose 0.5%, while the VanEck Vectors Gold Miners ETF GDX, +0.26%  rose 0.6%.

Falling U.S. bond yields also were cited as a reason for dollar weakness and gold strength on Thursday. The yield for the benchmark 10-year Treasury note TMUBMUSD10Y, +0.60%  logged its biggest one-day drop in more than three months on Wednesday, and although yields stabilized Thursday, they remained at risk for another move lower.

”The flattening of the yield curve has triggered concerns that investors are possibly pricing in a slowing of the economy or even a recession and while this has historically happened on such expectations, I’m not convinced this is the case this time,” said Craig Erlam, senior market analyst, with Oanda.

“Given the current environment, it’s possible that this is more a reflection of longer-term interest rates and the low inflation environment than the economic prospects,” he said. “Still, if yields on long-term U.S. debt don’t rise or even fall as the Fed raises interest rates, it could fuel fears of an impending recession,” which could prove supportive for gold.

More clues on the economy were found in the release of two economic reports Thursday morning, although the metals market reaction was limited. Jobless claims were flat at 245,000 in the latest week, a historically low level. Separately, the U.S. deficit in goods increased 2.3% in November.

Copper prices remained at four-year highs Thursday, reflecting bets on strong demand from China, which accounts for about half of global demand at 23.5 million metric tons, and amid reports of supply disruptions in top producer Chile, according to Reuters.

March copper HGH8, +0.65% futures rose 2.45 cents, or 0.7%, to settle at $3.3085 a pound. On Wednesday, it finished at $3.2840 a pound, the highest level since December 2013. The asset on Thursday extended its win streak to a 16th straight rise, according to FactSet data, representing its longest uptrend ever.

On global markets, benchmark copper on the London Metal Exchange earlier hit $7,312.5 a metric tone, its highest since January 2014. It is up more than 30% so far this year.

The metal is used widely in the power and construction industries, with gains often used by market participants as a gauge of the health of the global economy.

In addition to Chinese demand, political success with changes to the U.S. tax code have raised expectations that President Donald Trump’s administration will be able to enact a bill to boost infrastructure spending, feeding the appetite for industrial metals, market participants said.

In other metals, March silver SIH8, +0.80% jumped 16.7 cents, or 1%, to end at $16.923 an ounce.

March palladium PAH8, +0.53%  rose $7.10, or 0.7%, at $1,063.45 an ounce. April platinum PLF8, +0.35% meanwhile, added $3.50, or 0.4%, to $931.50 an ounce.

Read: How palladium and lumber defied the 2017 commodity slump

And: Here’s how oil, industrial metals could trade in 2018

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