Gold prices post a golden cross, settle at highest since April

Price action

• Gold futures for February delivery
  GC00,
  +1.27%

  GCG23,
  +1.27%
  climbed $22.90, or 1.2%, to settle at $1,921.70 an ounce. Prices for a most-active contract ended 2.8% higher for the week and hadn’t settled above $1,900 since late April, according to Dow Jones Market Data.

• March silver 
  SI00,
  +1.71%

  SIH23,
  +1.71%
  tacked on 37 cents, or 1.5%, to $24.372 per ounce, for a weekly rise of 1.6%.

• Palladium for March 
  PAH23,
  -0.16%
  shed $3.60, or 0.2%, to $1,787.30 an ounce, losing 1.1% for the week, while platinum
  PLJ23,
  -0.86%
  fell $11.80, or 1.1%, to $1,072.50 per ounce, posting a weekly decline of 2.9%.

• March copper
  HG00,
  +0.50%

  HGH23,
  +0.50%
  climbed by 2 cents, or 0.5%, to settle at $4.216 per pound, marking another finish at its highest since June. For the week, copper futures ended 7.8% higher.

Market drivers

“Gold has easily cleared the $1,900 level, and hitting these big numbers helps attract investors to a trend,” Brien Lundin, editor of Gold Newsletter, told MarketWatch.

Most-active gold futures posted a golden cross on Friday, Dow Jones Market Data show, with the 50-day moving average rising to $1,789.94, topping the 200-day moving average of $1,786.74. The last golden cross was seen on Feb. 11, 2022.

A golden cross for gold “should attract more buying from technically-oriented traders,” said Lundin.

Gold futures extended their gains from Thursday, when signs of cooling U.S. inflation with the December consumer-price index weighed on the dollar and helped to drive the yellow metal even higher.

The ICE U.S. Dollar Index
DXY,
-0.06%,
a measure of the greenback’s strength against a basket of rivals, fell nearly 1% on Thursday in response to the CPI data. In Friday dealings, it was down nearly 0.1% to 102.192.

The dollar downtrend has been helping gold, and that seems “likely to continue,” Lundin said.

Thursday’s CPI data “confirmed that inflation is now on a downward trajectory, albeit still considerably higher than the Fed’s target of 2%,” said Rupert Rowling, market analyst at Kinesis Money, in market commentary. “As such, while the U.S. central bank is still likely to increase its benchmark rates when the committee meets at the end of this month, the expectation now is that the hike will only be 25 basis points.”

Meanwhile, data released Friday showed a survey of U.S. consumer sentiment rose to 64.6 in January, a nine-month high, reflecting easing worries about inflation.

Lundin pointed out that fundamentally, “one can consider that there are two basic paths ahead for monetary policy: the Fed pauses and perhaps pivots, after having successfully driven inflation close to its target level, or the Fed does so without having gotten inflation down to near its 2% target.”

“Either outcome would be bullish for gold, but the latter would be even more so since it would not be bullish for equities or bonds” — and would attract much greater allocations from diversified portfolios, he said.

So, “from both fundamental and technical standpoints, it looks like this gold rally has some legs to it,” said Lundin. “It is a bit overbought right now, so a pause next week would not surprise, but neither should we discount the momentum the metal is now demonstrating.”

Gold has been in rally mode since early November, but its latest leg higher this year has grabbed the market’s attention as investors wonder whether the precious metal might return to its highs north of $2,000 per ounce seen in March of last year.