Gold Settles at June Highs, Refocusing Sights on $1,900

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 Gold bounced back from two days of losses to close at its highest levels since June, once again thumping naysayers skeptical that the yellow metal could be on the cusp of recapturing the $1.900 level sought by bullion bulls.

U.S. gold futures’ most active contract, December, settled Wednesday’s session up $16.10, or almost 1%, at $1,870.20 an ounce.

That was the highest settlement for a benchmark gold futures contract on New York’s COMEX since June 11, when the close was $1,879.60. December gold, in fact, got to a five-month high of $1,879.35 in the previous week.

It was also a vindication of sorts for gold bulls, who appeared to be on softer ground since the start of this week.

December gold plunged almost $30 from Tuesday’s peak, capping a two-day downturn, after a seven-day run-up that boosted the contract by almost 5%.

Wednesday’s turn-around had re-established gold’s charge toward the $1,900 area, said Sunil Kumar Dixit, chief technical strategist at SKCharting.com.

“It appears very much on its way to the target of $1,900-$1,916,” said Dixit. “The stars are aligned for gold, so long as it holds above $1,860 and the U.S. inflation picture serves as the backdrop theme.”

Bullion has always been touted as an inflation hedge. But it wasn’t able to live up to that billing earlier this year as intense speculation that the Federal Reserve will be forced in a faster-than-expected rate hike had sent Treasury yields and the dollar rallying instead, at bullion’s expense.

That trend abated somewhat after Fed Chair Jay Powell assured earlier this month that the central bank will be patient with any rate hike, which will only come after in the later half of next year.

The Labor Department then reported last week that the U.S. Consumer Price Index, which represents a basket of products ranging from gasoline and health care to groceries and rents, rose 6.2% during the year to October. It was the fastest growth of the so-called CPI since November 1990, an acceleration driven mostly by pump prices of fuel running at seven-year highs.

Since then, the U.S. 10-year Treasury note, a key indicator of real interest rates, has hit three-week highs above 1.6% and the Dollar Index has reached a 16-month peak of 95.85. Ordinarily, that combination would have been fatal to gold. But the yellow metal has survived those threats this time.

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