Gold fell as US Treasury yields rebounded on improved risk appetite, while investors continued to weigh the outlook for stimulus following a hot inflation print.
European stocks and US futures advanced on Friday, bolstered by robust corporate earnings. US bond yields rose after three straight days of declines, causing non-interest bearing gold to sink through its 50-day moving average.
Gold for December delivery on Friday fell US$29.60 to US$1,768.30 an ounce, but still posted a 0.6 percent weekly increase.
US government data showed high inflation persisting in the world’s largest economy, causing 10-year Treasury yields to sink as traders considered how the US Federal Reserve would react.
“The market, as a snapshot of that, priced in increased stagflation fear,” said Marcus Garvey, head of metals strategy at Macquarie Group Ltd. “That inflation now will bring forward tightening, but the economy won’t handle it, and, therefore, it will be a very limited tightening cycle.”
Bank of America Corp chief executive officer Brian Moynihan joined fellow finance industry leaders, including Morgan Stanley chief executive officer James Gorman and Goldman Sachs Group Inc chief operating officer John Waldron, in predicting that inflation would stick around. Some Fed officials also are now less certain price pressures would prove transitory.
That has caused traders in a key corner of the US short-term rates market to bet the Fed would hike faster and more aggressively starting at the end of next year.
Whether the central bank takes action to curb inflation at the expense of employment would be crucial to gold’s performance over the next year.
Investors so far remain cautious. Exchange-traded funds cut their gold holdings for a fourth week running, according to an initial tally by Bloomberg.
Switzerland told its gold refineries to closely audit imports arriving from the United Arab Emirates (UAE), fearing reputational damage from trading in illicit bullion.
In a letter dated Monday seen by Bloomberg, the Swiss State Secretariat for Economic Affairs said refineries should ensure sufficient steps are taken to identify the true country of origin for all gold coming from the UAE.
He pointed to the high volume of imports coming from the state — set to account for 10 percent of Switzerland’s total this year.
‧Silver for December delivery on Friday fell US$0.13 to US$23.35 an ounce, up 2.7 percent weekly.
‧Copper for December deliver on Friday rose US$0.10 to US$4.73 a pound, surging 10 percent for the week.
Additional reporting by AP
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