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Gold futures on Friday retreated a day after the biggest daily gain of the month, weighed by a rise in bond yields and a strengthening dollar.
For the week, however, both gold and silver are on track to book weekly advances as investors wade into precious metals with some eye toward protecting themselves against choppiness in the market as the global economy attempts to stage a fuller recovery from the COVID pandemic.
Gold this week has mostly benefited from a weekly retreat in the dollar, down 0.7%, as measured by the ICE U.S. Dollar Index
DXY,
Dollar-priced bullion tends to move inversely with the dollar, as a stronger buck can be comparatively more expensive to overseas buyers.
On the day, however, the greenback was gaining traction higher, up 0.2%, while benchmark yields for government debt were climbing. The 10-year Treasury note
TMUBMUSD10Y,
was yielding around 1.67%, up 3.3 basis points, though it is down from where it ended last week at around 1.72%.
Against that backdrop, June gold
GCM21,
GC00,
fell $14.20, or 0.8%, to $1,744 an ounce on Comex after ending 1% higher on Thursday to mark the highest finish for a most-active contract since Feb. 25, and largest one-day dollar and percentage climb since March 31, FactSet data show.
Although the weekly trend has been higher for billion and silver futures, some market participants are skeptical about the path forward for gold.
“The yellow metal is trying to complete what looks like a double bottom pattern, but as long as the price remains beneath the previous lows of around $1760/ounce, it’s tough to be optimistic,” wrote Marios Hadjikyriacos, investment analyst at XM, in a research note.
“Fundamentally, the coming months will be pivotal as inflation accelerates. If markets believe that the Fed will stick to its promise to let the economy run hot, gold will likely shine, but if inflation overshoots too much and rate-hike bets blossom again, more pain could be in store,” he wrote.
Investors have been wary of a the economy overheating in the demand rebound from the COVID shock, putting pressure on prices. Inflation has thus far remained below the Federal Reserve’s target for most of the past decade, while the U.S. labor market remains about 8.4 million jobs short of its pre-pandemic level.
