Metals Stocks: Gold advances toward 6-month high as dollar weakens after BOJ yield policy change

by | Dec 20, 2022 | Stock Market

Gold prices advanced on Tuesday with the most-active contract reaching a six-month high after a surprise announcement from the Bank of Japan helped to weigh on the dollar, bolstering precious metals prices. Price action
Gold for February
GCG23,
+1.68%
 
GC00,
+1.68%
delivery climbed $31.60, or 1.8%, to $1,829.30 per ounce on Comex, heading for its highest settlement since June 24, 2022, according to Dow Jones Market Data.

Silver for March delivery
SIH23,
+4.51%
 
SI00,
+4.51%
advanced $1.1, or 4.7%, to $24.29 per ounce, on track to book its highest settlement in eight months.

March palladium
PAH23,
+2.71%
rose $72.10, or 4.4%, to $1,734 per ounce, while platinum prices
PLF23,
+2.48%
gained $27.40, or 2.8%, to $1,015.60 per ounce.

Copper prices
HGH23,
+0.37%
advanced 4 cents, or 1.1%, to $3.826 per pound.

Market drivers Gold and silver prices rallied on Tuesday morning, supported by a drop in the U.S. dollar index after the Bank of Japan (BOJ)’s decision to loosen its grip on its domestic bond market has commingled with anxieties about a looming recession, pushing gold prices back toward their highest levels in more than five weeks.

After resisting the global trend of more hawkish monetary policy all year, the BOJ shocked global investors by announcing on Tuesday that it would loosen its policy of tightly controlling yields on government bonds, an announcement that sent the Japanese yen and government bond yields surging. The BOJ said the yield on the 10-year Japanese government bond
TMBMKJP-10Y,
0.417%
could rise as high as 0.5% from a previous cap of 0.25%. The central bank has set a target range around zero for the benchmark government bond yield since 2016 and used that as a tool to keep overall market interest rates low. The Japanese yen
USDJPY,
-4.38%
advanced more than 3% against the dollar, helping to push the ICE U.S. Dollar Index
DXY,
-0.80%,
a gauge of the dollar’s strength against a basket of rivals, down by 0.8% to 103.86. See: Why the Bank of Japan’s surprise policy twist is rattling global markets “Whilst the weaker dollar is certainly helping, gold’s rebound comes alongside the uptick in bond yields, suggesting that investors are getting gloomier about the outlook on fears that the Fed and other central banks are overtightening,” said Raffi Boyadjian, lead investment analyst at XM, in a Tuesday morning note. Gold prices were further supported by mixed U.S. housing construction data on Tuesday morning. Construction on new U.S. homes fell a seasonally adjusted 0.5% in November to 1.43 million, the Commerce Department said Tuesday. However, building permits for new homes fell 11.2% to 1.34 million in November. 

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