Gold futures ended lower on Friday, retreating after two days of direct gains, with prices recording their first weekly loss in 10 weeks at the back of the last strength in U.S. Treasury yields.
The week began with gold trading in record territory but will end with “several factors weighing the price of gold,” including hopes for a COVID-19 vaccine and an increase in Treasury yields, said Chris Gaffney, president of World Markets at TIAA Bank. The higher yields on government debt have been attributed to some of the softness of gold, which yields no yield.
Production of 10-year Treasury note TMUBMUSD10Y,
on Thursday hit its highest in eight weeks. In Friday trading, it was trading at 0.693% compared to 0.562% last Friday.
“The ‘carrying cost’ of gold is negative in the current environment as investors are not sacrificing interest in carrying strong assets such as gold,” Gaffney told MarketWatch.
December gold GCZ20,
pulled $ 20.60, or about 1.1%, to settle at $ 1,949.80 an ounce, after rising to 1.1% on Thursday. Gold prices saw a weekly decline of about 3.9%, based on last Friday’s most active contract deal, which snatched a nine-week profit line, according to FactSet data. On Tuesday, futures prices suffered the biggest daily drop of the dollar since April 15, 2013.
Meanwhile, September SIU20 silver prices,
It dropped $ 1.63, or 5.9%, to finish at $ 26,089, after rising 6.7% the day before. Silver suffered a weekly loss of 5.3%.
If one word could be used to describe the action of gold prices this week, the best fit would be ‘crazy’.
“If one word could be used to describe the action of gold prices this week, the best fit would be ‘crazy,'” Lukman Otunuga, senior market analyst at FXTM, told MarketWatch.
“After experiencing a substantial profit session, earlier in the week … the precious metal is trading back above $ 1,950,” he said.
“Investors continue to be drawn to the precious metals thanks to US-China tensions, the US stimulus stalemate and an unwanted US dollar.”
Investors on Thursday also leaked economic reports to the US to help assess the impact of the COVID-19 pandemic on the national economy. A U.S. retail sales ratio rose 1.2% in July, coming weaker than a forecast.
Retail in the U.S. lost expectations, “a sign that the global recovery is slowing,” Gaffney said. “This is why a vaccine is so important. Consumers will not feel completely safe to travel and spend until they feel safe from the virus.”
The U.S. sales report follows a 1.1% drop in Chinese retail sales in July, amid expectations for a flat reading.
Separately, a report on U.S. productivity rose at an annual rate to 7.3% in the second quarter, exceeding expectations for a reading of 1.4%, based on average estimates by economists surveyed by MarketWatch. Industrial production grew by 3% better than expected in July, for the third straight monthly profit.
Looking ahead, gold traders will continue to monitor the “possible occurrence of a ‘second wave’ of the virus across Europe and Asia,” as well as interest rates, as gold will benefit if interest rates remain low, said Gaffney. Traders will also watch talk of economic stimulus and interest resulting in debt levels, he said.
Among other metals traded on Comex on Thursday, September HGU20 copper,
captured by almost 1.9% to $ 2,859 pounds, for a weekly increase of 2.4%. October platinum PLV20,
pour 2.4% to $ 959.10 an ounce, losing 1.2% for the week, and Palladium Palladium PAU20,
lost 3.3% to $ 2,143.80 an ounce – down 1.5% from the weekend before.