Gold posted its first weekly drop in more than two months after being buffeted by climbing real yields, profit-taking and uncertainty over US-China trade talks.
Bullion is ending a week filled with big price fluctuations on a relatively tame note, trading at more than US$100 an ounce below last week’s record after dropping the most in seven years on Tuesday.
Gold and silver spot prices posted their first weekly declines since June 5.
The rally in gold, which has surged this year as central banks worldwide took steps to shore up ailing economies and real yields turned negative in the US, is encountering some turbulence with the sell-off in US Treasuries and a stalemate in US stimulus talks.
China’s economic recovery continued last month and US industrial production increased for a third straight month, further dimming the appeal of bullion as a haven, data showed on Friday.
“The washout we saw earlier this week was sort of taking the froth out of the speculation” in gold, Matthew Weller, global head of market research at Gain Capital Group LLC, said by telephone.
Spot gold fell 0.4 percent to US$1,945.12 an ounce in New York, closing with a 4.4 percent weekly loss, the first decline since June and the largest since March.
Futures for December delivery retreated 1 percent to settle at US$1,949.80 on the Comex.
Silver for immediate delivery declined 3.8 percent to US$26.4463 an ounce, after a 7.8 percent jump on Thursday.
Even with the decline, gold is still up 28 percent this year.
Credit Suisse raised its gold price forecast for next year to US$2,500, seeing a “perfect storm” of factors pushing bullion to a new high.
On Friday, a report showed that US consumer sentiment remained weak this month, amid expectations of a bumpy ride ahead for an economy coping with an unfettered COVID-19 pandemic and widespread joblessness. A meeting expected between China and the US to discuss progress on the first phase of their trade deal was also postponed indefinitely.
“Barring further profit-taking, we think the longer-term uptrend is intact given US dollar weakness and the scale of stimulus and as we expect interest rates to remain low or negative,” Suki Cooper, precious metals analyst at Standard Chartered Bank, said in a note. “Price dips are likely to be viewed as buying opportunities as the macro backdrop remains favorable for gold.”
“All the conditions for a favorable gold price environment are present,” said Jake Klein, executive chairman of Australian producer Evolution Mining Ltd. “The geopolitical tensions, the COVID pandemic and the impact that’s having — unemployment rates are rising — these are all unfortunate circumstances. Unfortunately, gold is a beneficiary of those times.”
Weller said that he is watching stimulus deliberations in the US.
“[The US] Congress will act when the market forces them to. So if we see stocks come off a bit, that could increase the pressure, and once people start getting evicted and once the unemployment payments drop off severely, I think that’s what could cause Congress to act, and therefore put some wind in the bulls sails when it comes to gold,” Weller said.
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