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Gold futures climbed on Tuesday, finding some support despite strength in Treasury yields and holding ground above the key $1,800 mark, after data showed slower-than-expected growth among U.S. manufacturers in December.
A closely followed index of U.S.-based manufacturers dropped to 58.7% in the final month of 2021 compared with 61.1% in November, the Institute for Supply Management said Tuesday. That matched the slowest pace of growth in 11 months. Economists polled by The Wall Street Journal had forecast the index to slip to 60%.
The data come ahead of Friday’s much-anticipated monthly U.S. jobs report, which could help guide price direction for havens such as gold.
“The chaos caused by the rapid spread of the omicron variant came too late to have much effect on December payrolls, which we estimate increased by a healthy 350,000,” said Michael Pearce, senior US economist at Capital Economics, in a note Tuesday. “But the huge numbers of people being told to isolate could drive a significant drop in payrolls in January.”
For now, some analysts say that bullion continues to draw investment interest from those seeking to hedge against the potential impact of the omicron variant on the parts of the world.
Infections have surged, with the U.S., for example, registering 1,083,948 cases on Monday, according to data collected by Johns Hopkins University—more than double the previous record of 486,428 set four days ago.
“The price of gold is rising this Tuesday, with investors seeking the safety of the precious metal as some countries tighten measures to contain the escalation in the numbers of new omicron cases,” wrote Ricardo Evangelista, senior analyst at ActivTrades, in a Tuesday research report.
February gold
GCG22,
GC00,
was up $11, or 0.6%, at $1,811.10 an ounce on Comex. That followed a 1.6% decline on Monday, which brought the contract to the lowest for a most-active since Dec. 21, FactSet data show.
March silver
SIH22,
meanwhile, was trading up 30 cents, or 1.3%, to reach $22.11 an ounce, following a 2.3% drop on Monday.
Any gains for gold “will be capped by developments in the U.S., where the dollar continues to strengthen on the back of higher Treasury yields, with the markets holding firm to the belief that the Federal Reserve will hike interest rates at least 3 times in 2022,” Evangelista wrote.
At last check, the 2-year Treasury note yield
TMUBMUSD02Y,
was hanging around a 22-month high, at 0.794%.
Market-based projections point to the Federal Reserve starting the process of lifting rates as many as three times in 2022 this spring, when it concludes its asset-purchase program.
The dollar, meanwhile, was trading 0.1% lower on Tuesday but has climbed 0.1% so far in early 2022 to around 96.07, as measured by the ICE U.S. Dollar Index
DXY,
A stronger dollar and rising yields can serve as headwinds for prospective investors in bullion, which doesn’t bear a coupon and is priced in U.S. dollars.
In other Comex trading, March copper
HGH22,
rose 0.8% to $4.457 a pound. April platinum
PLJ22,
added 2.7% to $979.10 an ounce and March palladium
PAH22,
climbed 2.6% to $1,873 an ounce.
