To The Moon

By Myra P. Saefong and Joseph Adinolfi

Gold headed higher on Thursday, with prices on track to settle at their highest in a week and holding above the key $2,000-an-ounce threshold.

Investors weighed the outlook for interest rates as the Federal Reserve continued their efforts to cool inflation.

Price action

Gold futures for June delivery GC00, 0.38% GCM23, 0.38% gained $8.70, or 0.4%, to $2,016 an ounce on Comex after losing 0.6% on Wednesday.

May silver SI00, -0.28% SIK23, -0.26% rose 2.9 cents, or 0.1%, to $25.40 an ounce.

June palladium PAM23, -1.25% climbed 70 cents, or less than 0.1%, to $1,619.50 an ounce, while July platinum PLN23, 0.09% gained $4.80, or 0.4%, to $1,110.50 an ounce.

Copper for May HGK23, -1.14% delivery fell by 5 cents, or 1.2%, to $4.029 a pound.

Market drivers

Concerns about an imminent recession have eased enough to take gold off the boil, precious metals strategists said. Prices a week ago had settled at $2,055.30 -- the second highest Comex most-active futures contract settlement on record.

If the yellow metal is to make another run at its record settlement high from August 2020, "recession concerns would likely need to resurface," said Marios Hadjikyriacos, senior investment analyst at XM.

On Wednesday, New York Fed President John Williams said the latest economic data shows cooling in inflation and the labor market. Even so, inflation is "still too high and we will use our monetary policy tools to restore price stability," Williams said, without being more specific.

On Thursday, the Philadelphia Fed said its gauge of regional business activity slumped to negative 31.3 in April from negative 23.2 in the prior month. Separate data showed the number of Americans who applied for unemployment benefits last week rose by 5,000 to 245,000, pointing to a small erosion in the robust U.S. labor market.

Against that backdrop, the U.S. dollar eased back after strengthening Wednesday. The ICE U.S. Dollar index was down 0.3% at 101.68 in Thursday dealings.

For gold, the U.S. dollar is "certainly part of the equation," but the metal may be "stalling primarily on the basis of 'groupthink' and anchoring bias among metals investors," said Adam Koos, president at Libertas Wealth Management Group.

Gold has seen prices in this current range at two major times in history -- at the August 2020 highs and at the March 2022 highs, he told MarketWatch. "There are many people who purchased gold at either of those points who are now essentially 'back to break-even,' so they cut bait, hit the sell button, and prices stall and fall."

The question is how many sellers are there, said Koos, but the bigger question is "how many shorts are out there just waiting to cover and push prices higher if gold breaks out to all-time highs?"

Gold could break down, but "observing momentum all while keeping inflation, interest rates, and the dollar in mind, probabilities are that it ultimately resolves higher over time," Koos said.

-Myra P. Saefong