Gold futures ended lower on Friday to post their first weekly loss in five weeks, as Treasury yields bounced and the U.S. dollar edged higher.
Gold declined as “risk appetite runs wild,” with the S&P 500
making a fresh intraday record high Friday and Treasury yields poised to end the week near this week’s high, said Edward Moya, senior market analyst at Oanda.
The precious metal is likely to continue to trade around the $1,800 level leading up to the Federal Reserve policy decision on Wednesday, he said in a market update.
Gold for August delivery
For the week, the most-active gold contract marked a 0.7% loss, while silver fell 2.2%, according to FactSet data.
The dip in gold prices is “no surprise given an uptick in Treasury yields,” Michael Armbruster, managing partner at Altavest, told MarketWatch. “However, long-dated Treasury yields are trending lower and that is bullish for gold.” The 30-year Treasury bond yield was up Friday, but down month to date.
“Any dip in gold below $1,800 is an opportunity for gold bugs to add to their long position,” said Armbruster.
Gold’s loss for the week follows choppy trading in many financial asset markets. A steep selloff in equities on Monday and other assets viewed as risky added to a safe-haven Treasury rally that drove the yield on the 10-year note
to a five-month lows.
Investors, however, rushed in to buy the dip in stocks, while the Treasury rally lost steam, allowing yields to rise. The greenback also firmed, with the ICE U.S. Dollar Index
on track for a 0.2% weekly rise. Higher Treasury yields can raise the opportunity cost of holding nonyielding assets, while a stronger dollar makes commodities priced in the unit more expensive to buyers using other currencies.
“Choppiness elsewhere begets choppiness for gold, but we still think there are underappreciated downside risks for current prices, as our forecasts currently indicate,” said Christopher Louney, analyst at RBC Capital Markets, in a note.
“Economic data, Fed policy expectations, and news around prevailing COVID strains will continue to dominate both directly for gold and indirectly (through moves in the dollar, rates, and equities),” he wrote.
But with prices just below the middle of their one-year range and with ETP (exchange-traded product) flows giving back a significant share of their May rebound and thus still down significantly for the year to date, “the market remains largely unconvinced in gold prospects despite price gains and inflationary gold headlines,” Louney said.
Gold prices found some support, moving back above the $1,800 mark right after research firm IHS Markit said its preliminary composite output index for the U.S. fell to a four-month low of 59.7 in July, from 63.7 in June.
Rounding out trading on Comex, September copper
added 1.4% to $4.40 a pound, with most-active contract prices tallying a rise of 1.8% for the week.
shed 2.7% to $1,061.40 an ounce, for a weekly loss of more than 4%, while September palladium
lost 1.6% to $2,662.40 an ounce, settling up roughly 1% for the week.