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Metals Stocks: Gold ends slightly lower, suffers 5th straight weekly drop

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Gold dipped below $1,700 an ounce on Friday and remains lower, despite a pullback in the U.S. dollar and Treasury yields as the precious metal heads for its fifth straight weekly drop.

Meanwhile, copper tumbled to its weakest level in 20 months as recession fears continued to weigh on industrial metals prices.

Price action

Gold
GC00,
-0.12%

GCQ22,
-0.12%

for August delivery was down $2.70, or 0.2%, at $1,703.10 an ounce on Comex, after dipping as low as $1,696.60.

Silver
SIU22,
+2.14%

for September delivery was up 33 cents, or 1.8%

Platinum futures
PLV22,
+1.27%

for October delivery rose $11.50, or 1.4%, to $828.80 an ounce.

Palladium futures
PAU22,
-3.17%

for September delivery shed $61.10, or 3.2%, to trade at $1,837 an ounce.

Copper futures
HGU22,
+0.83%

for September delivery were up 5.3 cents, or 1.6%, at $3.265 a pound.

What analysts are saying

A team of commodity strategists at UBS downgraded their gold forecasts on Friday. They now expect the yellow metal to trade as low as $1,600 per ounce by the end of 2022, before staging a slight recovery in 2023.

“We think it’s too early to buy gold at current levels and still advise protecting existing positions. We see opportunities to be more positive in 2023,” the UBS precious metals team wrote in a note to clients.

They also downgraded their forecast for platinum, which has fallen sharply over the past two months to its weakest level since 2018.

“A combination of factors have weighed on platinum: A lower gold price and high energy prices, and a potential cut to Russian gas exports to Europe, increasing the risk of Europe heading into a recession which would hurt platinum demand given Europe accounts for about 20% of platinum demand,” the UBS team wrote.

U.S. consumers boosted retail spending in June by a solid 1% in light of the stickier inflation and uncertain economic forecasts, but some of the growth can reflect higher prices of gasoline and food. Economists polled by The Wall Street Journal had forecast a 0.9% increase in retail sales last month.

“A solid increase in retail sales—with spending on most categories besides gas and groceries rising faster than inflation—is further evidence that the U.S. economy continued to expand in June,” said Bill Adams, chief economist for Comerica Bank in Dallas, in an email.

The University of Michigan’s gauge of consumer sentiment survey inflation expectations over the next year fell to 5.2% in July from 5.3%. The industrial production in the United States was down 0.2% from a month earlier.

“With national average gasoline prices coming back down in the first half of July, sentiment could improve, and recession fears ease,” Bill said. “Even so, the U.S. economy is close to stalling out, and one more big shock would be enough to push it into recession. That shock might come from an energy crisis in Europe in the winter heating season, which could send U.S. natural-gas prices sharply higher, or from spillover from China’s weakening economy. In the face of these headwinds, the risk of recession is roughly a coin toss between now and the end of 2023.”

Meanwhile Peter Boockvar, chief investment officer of Bleakley Advisory Group, blamed weaker-than-expected GDP data out of China for the further fall in the prices of copper and other industrial metals. According to the data, which was released late Thursday night, the Chinese economy grew by just 0.4% during the second quarter, which was marred by COVID-inspired lockdowns in Shanghai and elsewhere. According to FactSet, economists had expected growth of at least 1.7%.

The ICE U.S. Dollar Index
DXY,
-0.42%
,
a gauge of the greenback’s strength against a basket of rivals, was off 0.3% at 108.26, although it remains just below its strongest level since 2002. The 10-year Treasury yield
TMUBMUSD10Y,
2.927%

was down 2.3 basis points at 2.937%.

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