Metals Stocks: Gold extends run above $1,200; copper dips

Metals Stocks: Gold extends run above $1,200; copper dips

Gold futures gained Wednesday, leaving the contract on track to close above the closely watched $1,200 line for a seventh straight day.

December gold GCZ8, +0.37%  was up $4.60, or 0.4%, at $1,207.40 an ounce, as the dollar index DXY, +0.01%  flitted between small gains and losses. The dollar and gold, which is chiefly priced in the U.S. currency, tend to move inversely. The dollar index is down 0.6% month to date, trimming its 2018 gain so far to about 2.6%.

Gold held its gain and the dollar index remained stuck near unchanged after data showed a rise in housing starts, a report that fits in with expectations that the Federal Reserve will nudge interest rates higher when it meets next week.

Trey Reik, senior portfolio manager, at Sprott Asset Management, said a major flip in positioning revealed in Commodity Futures Trading Commission data from earlier this month, as a possible portend to more gains in gold’s price. The metal trades down over 9% so far this year.

“For the first time in 17 years, commercial participants in gold futures flipped their COMEX positioning to net long,” he said. “In gold pits, commercials are generally regarded as smart money because, unlike hedge-fund speculators, gold commercials have little investment agenda outside hedging jewelry inventories, executing central bank directives and serving as funding foil to managed money on COMEX.”

Says Reik, “This does not mean commercial activity boasts infallible predictive value. Throughout gold’s two-year advance to September 2011 highs, for example, commercials maintained record short exposures. Such is the nature of the predominantly hedging role played by commercial players in gold markets. However, at least since the waning months of gold’s 20-year bear market which ended in 2001, on each occasion commercials have abandoned their hedging posture almost entirely, strength in the gold price has proved imminent.”

Around the metals complex, December silver SIZ8, +0.32% rose 0.1% to $14.200 an ounce. It holds just above the recent low of $14.142, set late last week, which marked the lowest settlement for a most-active contract since January 2016, according to FactSet data.

Read: Drop in silver prices to 32-month lows prompts sellout of Silver Eagle coins at U.S. Mint

Among the exchange-traded funds, the popular SPDR Gold Trust GLD, -0.15%  rose 0.2%, while iShares Silver Trust SLV, +0.00%  ticked 0.1% higher. The VanEck Vectors Gold Miners ETF GDX, +0.60% rose 0.8%.

Industrial metals markets remained on the defensive amid the latest trade developments.

On Tuesday, President Trump said the U.S. had “no choice” but to levy another $267 billion in duties on China. The move comes on top of announced tariffs on about $200 billion in Chinese goods late Monday; Trump also threatened additional penalties as part of his campaign to pressure Beijing to change its commercial practices.

In response, China retaliated with tariffs of 5% to 10% on $60 billion worth of U.S. products that will take effect Sept. 24 and said it may introduce more measures if the U.S. goes ahead with higher tariffs, according to The Wall Street Journal.

December copper HGZ8, +0.07%  eased 0.3% to $2.7215 a pound.

But October platinum PLV8, +0.28%  rose 0.5% to $819.40 an ounce. December palladium PAZ8, +1.03%  rose about 0.3% to $1,007.80 an ounce. Its close Tuesday at $1,004.80 was the first finish above $1,000 since mid-June, FactSet data showed.

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