Metals Stocks: Gold settles higher, silver books highest finish since April as dollar weakens after BOJ yield policy change

by | Dec 20, 2022 | Stock Market

Gold prices settled at their highest levels in a week on Tuesday 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,
+1.73%
 
GC00,
+1.73%
delivery climbed $27.70, or 1.5%, to finish at $1,825.40 per ounce on Comex. It was its highest settlement in a week when it settled at $1,825.50 last Tuesday, according to Dow Jones Market Data.

Silver for March delivery
SIH23,
+5.54%
 
SI00,
+5.54%
advanced $1.07, or 4.6%, to settle at $24.27 per ounce, its highest settlement since April 21, 2022.

March palladium
PAH23,
+3.97%
rose $68.60, or 4.1%, ending at $1,733.50 per ounce, while platinum prices
PLF23,
+2.78%
gained $25.30, or 2.6%, to finish at $1,013 per ounce.

Copper prices
HGH23,
+0.71%
advanced 2 cents, or 0.4%, to settle at $3.80 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’s decision to loosen its grip on its domestic bond market has commingled with anxieties about a looming recession, pushing gold prices toward their highest levels in six months, according to Dow Jones Market Data.

The most-active gold contract then lost momentum to trade well below its session high of $1832.40, settling at $1825.40 in early afternoon. The most-active silver futures finished at the highest level in eight months, according to Dow Jones Market Data. 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,
-3.87%
advanced more than 3% against the dollar, helping to push the ICE U.S. Dollar Index
DXY,
-0.70%,
a gauge of the dollar’s strength against a basket of rivals, down by 0.6% to 104.10. 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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