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Metals Stocks: Gold prices settle at a 2-month low as investors sidestep the metal for more attractive safe havens

Gold futures on Monday headed for their lowest finish since late February, with the traditional haven failing to find support as investors dumped equities and other assets perceived as risky while jumping into other assets perceived as safe, including U.S. Treasurys and other government bonds.

Gold for June delivery
GC00,
-1.92%

GCM22,
-1.92%

fell $31.70, or 1.6%, to $1,902.60 an ounce on Comex. A settlement around this level would be the lowest for a most-active contract since Feb. 28, FactSet data show. The yellow metal fell 2.1% last week, after back-to-back weekly gains.

May silver 
SIK22,
-2.47%

was down 55.4 cents, or 2.3%, at $23.705 an ounce. Silver on Friday logged a 5.6% weekly fall, which was the biggest such decline for a most actively traded contract since the week ended Jan. 28.

Gold was “unable to benefit much from the renewed flight to safety that’s gripped the markets since Friday,” said Raffi Boyadjian, lead investment analyst at XM, in a note.

“Investors appear to be fleeing to the safety of the world’s reserve currency and U.S. Treasurys rather than the traditional safe haven, gold,” he wrote. “Treasury yields were weaker across the curve today, but they remained elevated as the Fed is expected to front load its rate hikes in the coming months.”

U.S. benchmark stock indexes saw another round of losses after a steep Friday selloff that saw the Dow Jones Industrial Average
DJIA,
-0.37%

end nearly 1,000 points lower and post its largest one-day percentage drop since October 2020.

“Gold’s inability to benefit from falling stock markets is a reflection of how difficult it will be for gold to make significant gains given the interest rate outlook outlined by the Federal Reserve last week,” said Rupert Rowling, market analyst at Kinesis Money, in a daily note.

With interest-rate hikes by the U.S .central bank now “all but guaranteed in both May and June and highly likely in July too, this has given support to the U.S. dollar and made gold a much less attractive asset to hold given its lack of yield,” he said. 

The ICE U.S. Dollar Index
DXY,
+0.54%
,
a measure of the currency against a basket of six major rivals, jumped 0.4% to 101.65 after to trading as high as 101.74, its highest since March 2020. A stronger dollar can be a weigh on commodities priced in the unit, making them more expensive to users of other currencies.

A rise in Treasury yields pushed the rate on the 10-year note
TMUBMUSD10Y,
2.809%

to a level last seen in December 2018 last week, as investors penciled in an increasingly aggressive Federal Reserve response to inflation running at its highest in four decades. Yields, which move the opposite direction of prices, slumped Monday as investors piled into the haven as wider COVID-19 lockdowns in China put added pressure on global equities and triggered a slump across a range of commodities, including oil futures.

In other Comex metals trading, July copper
HGN22,
-2.92%
,
which is now the most active contract, lost 2.9% to $4.468 a pound. July platinum
PLN22,
-2.28%

declined by 2.3% to $906.30 an ounce and June palladium
PAM22,
-10.47%

traded at $2,120.50 an ounce, down 10.8%.

“A clean sweep of negative outside market influences has put the [palladium] market on the defensive,” analysts at Zaner wrote in Monday’s newsletter. “Adding to the selling mentality in palladium is a worsening infection situation in China…and that is exaggerated by the shift into a global tightening environment.”

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