Gold and silver posted their biggest weekly losses since March, when the global onset of the COVID-19 pandemic panicked markets.
The US dollar gained as concern over the outlook for global economic growth bolstered the appeal of the currency as a haven, sapping demand for gold.
Fears are mounting that rising coronavirus cases, particularly in Europe, might lead to more national lockdowns, denting the outlook for recovery. Gold fell 4.6 percent this week, while silver slumped 15 percent.
Photo: Reuters
“Both have succumbed to belated long liquidation and pressure generated by the strength in the general dollar index,” Edward Meir, an analyst at ED&F Man Capital Markets in New York, said in a note.
The rally in gold, often used as an inflation hedge, has also flagged as the dimming view of the recovery undercuts the outlook for a rise in consumer prices.
A lineup of US Federal Reserve officials have said that the central bank alone cannot boost prices and the economy would falter without more aid. Gold has fallen more steeply of late than currency exchange-rate developments would have led one to expect, Commerzbank AG analyst Carsten Fritsch said.
“Abating concerns about inflation due to rising corona numbers could have something to do with this,” Fritsch said in a note.
Democrats in the US House of Representatives have started drafting a stimulus proposal of roughly US$2.4 trillion that they can take into possible negotiations with the White House and Republicans in the US Senate. The bill could get passed by the House next week.
Spot gold fell 0.3 percent to close at US$1,861.58 an ounce at 5pm in New York. Silver slipped 1.1 percent.
Platinum also declined in its worst week since March, while palladium had the biggest weekly slide since July.
The Bloomberg Dollar Spot Index climbed 0.3 percent and registered its best week since April.
Gold’s slump could prove temporary with increased uncertainty over the US presidential election. Any conflict in the run-up to the vote should help lift the precious metal, RBC Capital Markets strategist Christopher Louney said.
“The recent moves open up room for gold to move higher more materially” in the next two quarters, he wrote in a note.
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