Gold recorded its fifth weekly loss, the longest streak of such declines in almost four years, with haven credentials sidelined by investors becoming super-bullish on the US dollar.
Gold for August delivery fell US$2.20 to US$1,703.60 an ounce, down 2.22 percent from a week earlier.
Bullion has come under relentless pressure in the past month as investors turn to the greenback in the face of an increasingly hawkish US Federal Reserve. That trade got another boost this week from soaring US inflation.
“The setup for a deep liquidation event in gold is building,” Bart Melek, global head of commodity strategy at TD Securities wrote in an e-mailed note. “With gold bugs falling like dominoes, prices are now challenging pre-pandemic levels, raising risks that the largest speculative cohort in gold will start to feel the pain under a hawkish Fed regime.”
While high inflation and growth threats typically aid gold, the precious metal is wilting as investors weigh the prospect of bigger or more frequent interest rate hikes from a Fed trying to curb price pressures. Gold does not pay interest, and, like other US dollar-denominated commodities, it suffers when the US dollar rises.
Still, investors’ expectations of an economic recession in the US should benefit gold as a safe haven, Commerzbank AG analysts said.
“This is one reason why we anticipate higher prices in the coming months and quarters,” they wrote in a note. “That said, for this to happen the still strong [exchange-traded fund] outflows would need to end and buying interest would need to return to the market.”
This week’s decline extends a tumultuous year for gold, which soared above US$2,000 an ounce after Russia invaded Ukraine. It has since cratered as the Fed raised interest rates and the US dollar strengthened.
Silver for September delivery rose US$0.36 to US$18.59 an ounce, declining 3.38 percent from a week earlier.
September copper rose US$0.02 to US$3.23 a pound, plunging 8.24 percent weekly.
Additional reporting by AP
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