Gold on pace for largest weekly loss in more than 3 years
Gold futures dropped Friday, headed toward their lowest finish since June, as strength in the U.S. dollar and equities this week, and growing expectations for a Federal Reserve interest-rate increase next month, set prices up for their largest weekly decline in more than three years.
Copper futures, meanwhile, were looking at a weekly climb of nearly 11%, which would be the largest weekly rise in over five years, as traders bet that policies from Republican Donald Trump’s administration could feed demand for industrial metals.
Gold futures for December delivery GCZ6, -2.65% fell $31.90, or 2.5%, to $1,234.50 an ounce. A settlement around this level would be the lowest since early June, according to FactSet data.
For the week, prices were poised for a loss of about 5.3%, which would be the largest since the week ended Sept. 13, 2013, when they lost 5.6%.
“Gold, a noninterest-bearing and dollar-denominated asset, has basically been THE victim of a sharp rise in both the dollar and equity prices, which have responded surprisingly positively to the outcome of U.S. elections,” said Fawad Razaqzada, technical analyst at Forex.com.
Read: The night Trump was elected president, Stanley Druckenmiller dumped gold
The ICE U.S. Dollar Index DXY, +0.12% was up about 0.2% in Friday dealings, poised for a weekly gain of 2.2%.
“The only certainty before Tuesday’s U.S. election was that a victory for Trump would hurt stock markets and send gold soaring,” said Adrian Ash, head of research at BullionVault. “That proved right for just 12 hours. One ghosted speech and a few days off Twitter was all it took for money managers to pile back into equities and dump gold.”
Still, “this week’s surge and drop in gold simply reflects in miniature what the metal tends to do for investors longer-term, offsetting losses in equities but easing back when stock markets do well,” he said.
Read: Why gold failed to rally after Trump’s win
U.S. equities headed lower Friday, but were set to post broad gains for the week, with the Dow Industrials DJIA, -0.07% ready to post a weekly rise of 7.7%.
“Money flows quickly turned risk-on” after the election and “gold has since collapsed,” Tyler Richey, co-editor of The 7:00’s Report, told MarketWatch.
Despite all of the “discouraging” price action, Richey said he’s “not throwing in the towel on our long call just yet as we still see the risk reward of being long gold here is favorable.”
However, it is “critical for the health of the relatively young uptrend in gold,” where technicals turned bullish April, that price support on the charts holds between $1,200 and $1,220, he said.
Meanwhile, a rate increase is expected at the central bank’s mid-December meeting. Higher rates are typically gold-negative due to the nonyielding metal’s opportunity cost in a rising-rate climate.
On Friday, Federal Reserve Vice Chairman Stanley Fischer signaled his support for gradual interest-rate hikes, saying in a speech that “the case for removing accommodation gradually is quite strong.”
Industrial metals
Among the industrial metals, prices copper traded lower Friday, but were set for a weekly gain of nearly 11%.
Improvement of roads, airports and ports are among the projects Trump has previously said he wants to tackle and that would boost demand for copper and other industrial metals.
December copper HGZ6, -1.53% shed 4.2 cents, or 1.7%, to $2.059 a pound, but for the week was up 10.7%. A gain of that size would be the largest since the week ended Oct. 28, 2011.
Read: Copper at 17-month high on hopes for U.S. construction boom
Still, Forex.com’s Razaqzada noted that “the assumption that Trump will somehow boost demand for industrial metals sounds quite strange to me.”
“After all, base metals—copper in particular—had been rallying days before the U.S. elections, he said. Copper futures have posted gains in each session since Oct. 24 through Nov. 10.
“Copper’s rally must therefore be due to hopes that the Chinese demand is recovering or expatiations of a tighter market,” said Razaqzada.
Meanwhile, silver, as a precious and industrial metal, has failed to post gains this week, though it is loss is smaller than that of gold’s.
“Silver has a split personality in that it can trade in sympathy with both the industrials like copper or precious varieties like gold,” said Tyler.
December silver SIZ6, -6.15% dropped $1.24, or 6.6%, to $17.515 an ounce. Silver looked headed for about a 4.7% weekly loss.
January platinum PLF7, -3.55% sank by $39, or 3.9%, to $943.20 an ounce, down about 6% on the week. December palladium PAZ6, -1.16% fell $18.90, or 2.7%, to $677.60 an ounce, but was up 8.5% for the week.
Among the exchange-traded funds, the SPDR Gold Trust GLD, -1.96% fell 2.3%, trading down 6% for the week, while the VanEck Vectors Gold Miners ETFGDX, -6.22% lost 6.9%, set to lose more than 15% for the week.
Read this article in its original format at MarketWatch.com
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