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Metals Stocks: Gold prices edge higher to kick off June

Gold futures edged higher Tuesday, maintaining the momentum that drove the precious metal up 8% last month.

Gold for August delivery
GC00,
+0.28%

GCQ21,
+0.28%

rose $5.10, or 0.3%, to $1,910.40 an ounce on Comex, while July silver
SI00,
+1.45%

SIN21,
+1.45%

gained 38.6 cents, or 1.4%, to trade at $28.40 an ounce.

The May rally for gold, which saw it finish above the psychologically important $1,900-an-ounce level on Friday, was accompanied by robust purchases by exchange-traded funds, which totaled 49 tons, said Carsten Fritsch, analyst at Commerzbank, citing Bloomberg data.

“They were the first monthly inflows since January and the biggest since September 2020. In view of the high inflation expected in the coming months and the significantly negative real interest rates as a result, demand among ETF investors should remain high, thus lending additional tailwind to gold,” he said.

The Federal Reserve remains in focus as policy makers weigh when to begin considering a reduction in its monthly pace of bond purchases in the wake of rising inflation. The U.S. personal consumption expenditure inflation index climbed to 3.6% in April from a year earlier, marking the strongest reading since 2008 and putting inflation well above the Fed’s 2% goal.

Market participants will likely see at least two speakers from the Fed on Tuesday, ahead of the central bank’s media blackout period before a two-day policy meeting June 15-16.

Fed’s Vice Chair for Supervision Randal Quarles will be interviewed by Politico at 10 a.m. and Fed Gov. Lael Brainard will delivered a speech to Economic Club of New York at 2 p.m. Eastern.

The debate remains in its early stages, but if it becomes more concrete, causing bond yields to rise, gold could “briefly come under pressure — as has been seen in past months when yields increased,” Fritsch wrote.

But Commerzbank doesn’t expect pressure on gold from rising bond yields to last as long as yields remain below the rate of inflation, he said, with the bank looking for gold to hit $2,000 an ounce by year-end.

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