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Gold heads for first weekly loss since June after wild ride

Buffeted by climbing real yields, profit-taking and a stalemate in US stimulus negotiations.
Image: Andrey Rudakov/Bloomberg

Gold headed for the first weekly drop in more than two months after being buffeted by climbing real yields, profit-taking and a stalemate in US stimulus negotiations.

Bullion is ending a week filled with wild swings on a relatively tame note, and more than $100 an ounce below last week’s record. Despite this week’s decline, gold is still up almost 30% this year, as real yields turned negative amid stimulus measures to support the economy. Credit Suisse raised its gold price forecast for next year to $2,500, seeing a “perfect storm” of factors pushing bullion to a fresh high.

Treasury yields steadied near an eight-week high, with the number of Americans applying for unemployment benefits falling below 1 million for the first time since the coronavirus pandemic began in March. Data Friday showed China’s economic recovery continued in July, though retail sales were weak.

“Barring further profit-taking, we think the longer-term uptrend is intact given US dollar weakness and the scale of stimulus and as we expect interest rates to remain low or negative,” Suki Cooper, precious metals analyst at Standard Chartered Bank, said in a note. “Price dips are likely to be viewed as buying opportunities as the macro backdrop remains favorable for gold.”

Spot gold fell 0.5% to $1,944.50 an ounce by 1:33 p.m. in London, set for a 4.5% weekly loss. Prices rose the previous two days after Tuesday’s 5.7% slump, the biggest one-day loss in seven years. Futures for December delivery retreated 1% to $1,951.90 in New York.

Silver for immediate delivery declined 2.8% to $26.7345 an ounce, after a 7.8% jump on Thursday. The Bloomberg Dollar Spot Index headed for a weekly loss.

There’s been little progress in political negotiations on a new round of pandemic relief, with House Speaker Nancy Pelosi saying she rebuffed an “overture” from Treasury Secretary Steven Mnuchin to restart talks. The outbreak is likely to be a challenge for years to come even with a vaccine, according to pharmaceutical and public-health experts.

“All the conditions for a favorable gold price environment are present,” Jake Klein, executive chairman of Australian producer Evolution Mining Ltd., said in a Bloomberg TV interview on Friday. “The geopolitical tensions, the Covid pandemic and the impact that’s having — unemployment rates are rising — these are all unfortunate circumstances. Unfortunately, gold is a beneficiary of those times.”

© 2020 Bloomberg

 

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Gold is nearing the end phase of its first full bull super cycle since it was disconnected from the US dollar in 1971. The speculative volatility is the corrective transition phase into the final uptrend of the final bull cycle. This final phase can last some years and go exponential. The prognosis supports the idea of a general devaluation of fiat currencies.
But what will cause the end of this super cycle? What will happen to create a super cycle bear in gold? Will it take the form of the hypothetical great reset? Gold has a generally inverse correlation with the US dollar index (DXY) which has already been in a 34 year grand super cycle bear trend that is just past the half way mark, viz: 2nd chart at: https://wavecount.blogspot.com/2020/07/us-dollar-index-dxy.html

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