After Reaching A 13-Month High Recently, Gold Futures Decline For A Second Day

Prices of gold headed lower for a second straight day on Thursday, but they remained within striking distance of a gold futures contract that has set an all-time closing high for the yellow metal, the contract with the highest volume of trading.

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A look at the price action

• There was a decline of $12.90 or 0.7% in the June gold contract on Comex, which closed at $2,022.70 per ounce, as compared to Wednesday, where it had increased by 0.1%. The most-active contract closed on Tuesday at $2,038.20, which was the highest close since March 2022.

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• SI00, -0.35% SIK23, -0.33% Silver futures for May delivery fell 26.2 cents, or 1.1%, to $24.775 per ounce as of the end of week.

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• Buying palladium in June PAM23, +0.19% dropped 0.2% to $1,422.50 an ounce, while buying platinum in July PLN23, 0.55% rose 0.2% to $1,009.10 an ounce, up 0.2%.

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• In the first week of May, copper for May delivery at HGK23, -0.03% fell nearly 0.3%, to $3.975 per pound, down nearly 0.3%.

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Insights into the market drivers

As far as the gold price goes, it seems that the pullback is likely to be a result of profit taking or the reluctance of bulls to take on new positions ahead of the long weekend, according to Colin Cieszynski, SIA Wealth Management's chief market strategist. In addition to this, he said, there are also factors that contribute to the reluctance, including the “event risk” associated with the release of nonfarm payroll numbers on Friday, when most of the exchanges will be closed or on a limited schedule.  

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The problem at the moment is it is hard to know whether the market needs new catalysts in order to resume its upward trend along with normal trading by Monday or Tuesday," commented Cieszynski.

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In the aftermath of recent comments by St. Louis Federal Reserve President James Bullard, gold prices have been under some pressure for now. Bullard dismissed concerns about financial stress in the economic outlook on Thursday, saying that inflation remains too high and that financial stress has not reduced economic growth. Additionally, he stated that if the Fed is to put pressure on high inflation, it must continue to increase interest rates in a range between 5.5% and 5.75%.

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As of Wednesday, gold futures were briefly trading at their highest level in about 13 months. Following Tuesday's close of $2,038.20, this was the highest contract finish since early March 2022 when gold was trading at $2,038.20.

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According to a commentary emailed to Trade Algo, market strategist at World Gold Council, gold investments, which are pushing it toward all-time highs, are being generated by "broader systemic events," Cavatoni said.

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During the last three trading sessions, gold futures settled above $2,000 for the first time and trade near the record-high most-active contract settlement of $2,069.40 from August 6, 2020, the date when the contract settled for the first time.

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The fact that oil production has been cut since the start of this week has raised questions regarding how the current economic situation and dollar strength will play out in the future. As a consequence of this, some market analysts have indicated that the U.S. could be entering a recession sooner than they originally expected.

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Gold has also been mentioned as a safe haven from the problems which continue to plague the banking sector, according to Mr. Dodd. “There are better places to put savings and to allocate assets to preserve capital, and gold achieves this.”