Metals Stocks: Gold ekes out gain Thursday as dollar pulls back and stocks rally

U.S. stocks charged higher Thursday, putting equities on pace for weekly gains, as investors weighed the minutes of the Federal Reserve meeting in early May which reinforced expectations that the central bank will fire off a round of half-percentage point rate increases this summer to combat inflation, but thereafter keep monetary policy flexible.

“Higher interest rates are damaging to gold, even if that doesn’t fit the big, historical picture,” said George Milling-Stanley, chief gold strategist at State Street Global Advisors, by phone.

But Milling-Stanley also thinks there’s room for gold to climb further, given sharp inflationary pressures from Russia’s war in Ukraine and higher labor costs in the U.S., which he expects to keep the cost of living elevated, in the 5% range, through year-end.

“That’s an opportunity for gold, and people who want to invest in gold,” he said, adding that the precious metals tends to outperform when inflation stays above 5% for at least one quarter.

Traders also have been weighing if Treasury yields might have hit a recent peak, particularly with the 10-year Treasury rate slipping to 2.76% from its roughly 3.12% high in early May.

Prices for gold had moved higher for four straight sessions, before it finished lower during Wednesday’s session.

Long seen as safe-haven assets during periods of market volatility, gold and silver have been moving more in line with “risk” assets like equities in recent months and weeks, much to the chagrin of some longtime analysts.

The dollar about two weeks ago touched its strongest level in decades. But the ICE U.S. Dollar Index
DXY,
-0.18%,
a gauge of the dollar’s strength against a basket of its main rivals, was off 1.2% for the week through Thursday. Some strategists, including Steven Barrow, head of G-10 strategy at Standard Bank, predicted the greenback could start to weaken. A stronger dollar makes commodities priced in the unit more expensive to users of other currencies.

The risk-on mood in equities on Thursday came despite a dire economic warning out of China, and news that Apple Inc.
AAPL,
+2.42%
had told its contractors to assemble fewer-than-expected iPhones during the coming production cycle.

Other precious metals also closed higher on Thursday, with platinum
PLN22,
+0.85%
up 0.8% to settle at $937.40 an ounce. Palladium
PAM22,
+0.64%
rose about 0.2% to end at $1,993.50 an ounce.

Copper
HG00,
+0.25%
prices were 0.2% higher, ending at $4.26 per pound.