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Metals Stocks: Gold prices inch higher after posting their best daily advance since December

Gold futures on Thursday inched higher, poised to extend their gains, a day after posting their best one-day advance since December and highest settlement in two months.

“Follow-through buying from Wednesday’s strong gains is featured, as inflation fears are heightened, and prompting traders and investors to respond accordingly,” Jim Wyckoff, senior analyst at Kitco.com, told MarketWatch. “One of those responses is to buy hard assets as an inflation hedge, including gold and silver.”

At last check, February gold GCG22, +0.20%   GC00, +0.20% was up $2.90, or 0.2%, at $1,846.10 an ounce, following a 1.7% rise a day ago. Wednesday’s rise brought the most-active contract to the highest finish since Nov. 19 on the back of the strongest daily advance of this year so far, according to FactSet data.

Meanwhile, silver for March delivery  SIH22, +1.58% added 35.9 cents, or 1.5%, to trade at $24.59 an ounce, following a nearly 3.2% gain for gold’s sister metal on Wednesday, which marked the highest value since Nov. 22.

A pop in the dollar and a rebound in equities was helping to limit the rise for safe-haven gold though, after the metal caught an updraft during a period of heightened concerns about inflation and the prospects for aggressive monetary tightening by central banks.

The recent move up in gold came amid some weakness in the dollar and a pullback in Treasury yields, which have been rising and raising the opportunity cost of owning nonyielding gold over government debt which bears a coupon. The 10-year Treasury yield TMUBMUSD10Y, 1.834% was holding steady at around 1.83% on Thursday, while the ICE U.S. Dollar Index DXY, -0.01% declined 0.2% on Wednesday but was trading up 0.1% on Thursday.

“The price action in gold has been exceptionally bullish too,” wrote Marios Hadjikyriacos, senior investment analyst at brokerage XM, in a daily note. “ Bullion blasted above the $1830 region yesterday to hit a two-month high, capitalizing on the faintest of pullbacks in real yields and the dollar,” the analyst wrote.

“This screams of a market that wants to go higher, as gold took almost no damage while yields soared this week but traded like a rocket the moment they retreated,” Hadjikyriacos said.

The rate-setting Federal Open Market Committee next gathers on Jan. 25-26 and is expected to set the stage for a series of interest-rate increases, which strategists argue could ultimately weigh heavily on the longer-term outlook for bullion.

U.S. economic reports Thursday had no big impact on metals, said Wyckoff.

Applications for U.S. unemployment benefits surged by 55,000 last week to 286,000 and hit a three-month high. Separately, the Philadelphia Federal Reserve’s index of manufacturing conditions rose by 8 points in January to 23.2, showing businesses are still growing despite the omicron outbreak a

In other Comex dealings, March copper HGH22, +1.71% tacked on 1.4% to $4.534 a pound. April platinum PLJ22, +2.64% climbed by 2.3% to $1,052.40 an ounce and March palladium PAH22, +2.15% traded at $2,038.50 an ounce, up 1.5%.

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