Gold turns higher, but stays on track for sharpest weekly skid in over a month

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Gold futures turned higher in Friday dealings, looking to stretch their gain from a day earlier, but the precious metal is still on track to suffer its sharpest weekly drop since early January.

Gold fell to its lowest level since July during Friday’s session, but it has since recovered, “thanks to the weakness in the U.S. dollar,” said David Madden, market analyst at CMC Markets UK.

However, “the wider negative trend since early January remains in place” for gold, said Madden, in a market update.

The ICE U.S. Dollar Index
DXY,
-0.35%
was down 0.4%. Weakness in greenback tends to support dollar-denominated gold prices.

The precious metal also found support after recent comments from U.S. Treasury Secretary Janet Yellen, Naeem Aslam, chief market analyst at AvaTrade, told MarketWatch.

Yellen on Thursday said that recent signs of improvement in the U.S. economy are no reason to scale back the Biden administration’s $1.9 trillion relief plan.

Yellen’s comments ignited hope for the passage of the relief plan, said Aslam. A larger stimulus package would lead to more debt, which would drive the value of the dollar lower, helping to lift gold prices.

“Next week we are expecting higher volatility” with a number of Federal Reserve officials expected to speak, said Aslam. “This is going to create more noise among investors and traders.”

“There is no doubt that gold price is way over sold and a rebound is on the horizon,” he said.

April gold
GC00,
+0.28%

GCJ21,
+0.28%
 rose $7.70, or 0.4%, to trade at $1,782.70 an ounce, after edging up by 0.1% on Thursday and snapping a four-session skid. On an intraday basis, however, the most-active contract fell to as low as $1,759, the lowest intraday level since June of last year, FactSet data show.

Meanwhile, March delivery
SI00,
+1.47%

SIH21,
+1.47%
tacked on 46 cents, or 1.7%, to $27.54 an ounce, poised to more than recover its drop from the prior session.

For the week, gold is headed for a 2.2% fall, which would represent its sharpest weekly slump since the 3.2% drop for the period ended Jan. 8, FactSet data show.

Silver was headed for a weekly gain of about 0.8%, perhaps benefiting from the metal’s dual role as a precious and industrial commodity that performs better when the economic outlook improves.

Gold has been on the backfoot amid a rise in global bond yields, highlighted by gains in the 10-year Treasury note
TMUBMUSD10Y,
1.344%,
which was on track for its sharpest weekly rate rise in about six weeks.

Hope for better economic times in the coming months and some success around COVID vaccines has undercut some of the enthusiasm for bullion, analysts said. The rise in yields also has helped to draw demand away from precious commodities, which don’t bear a coupon, compared against interest-bearing, debt that is perceived as risk-free.

“Gold also took a knock from the global jump in yields as the non-yielding bullion becomes less attractive when safe-haven bonds generate higher returns,” wrote Raffi Boyadjian, senior investment analyst at XM, in a daily note.

Among the other metals traded on Comex, prices for copper rose to their highest in more than nine years, buoyed by expectations that a recovery in the global economy will lift demand for the industrial metal.

March copper
HGH21,
+4.13%
rose 4.3% to $4.0685 a pound. Prices, based on the most-active contract, haven’t topped $4 since September 2011. It trades over 7% higher from the week-ago settlement.

Read: Copper prices top $4 a pound for the first time in over nine years

April platinum
PLJ21,
+2.49%
added 2.6% to $1,307.30 an ounce, on track for a weekly rise of around 3.8%, while March palladium
PAH21,
+1.20%
traded at $2,375 an ounce, up 1.1% in Friday dealings, and trading around 0.3% lower for the week.

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