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Gold futures on Friday were trading slightly lower to start trade in October, even as the U.S. dollar and government bond yields slipped, factors that should be supportive for bullion prices.
Futures for the precious metal were holding on to a small weekly gain of about 0.2% though, though yields for the 10-year Treasury
TMUBMUSD10Y,
climbed for the week and as the dollar, as gauged by the ICE U.S. Dollar Index
DXY,
rallied to the highest level in nearly a year.
On Friday, December gold
GCZ21,
GC00,
was trading down $2, or 0.1%, to $1,755 an ounce, following a 2% rise on Thursday. On Thursday, the most-active gold contract posted a 3.4% loss for the month, its sharpest monthly decline since June, and a 0.8% decline for the quarter, according Dow Jones Market Data.
Bullish investors make the case that uncertainty around the economic rebound and Federal Reserve’s policy amid heightened concerns about inflation foster a good environment for bullion and other precious metals. That is even as the Fed is set to taper monthly purchases of $120 billion in Treasurys and other bonds that helped to provide liquidity to troubled markets during the worst of the COVID pandemic.
“First of all, the start of tapering the Fed’s bond purchases is imminent and already seems to be partially priced by the markets,” wrote Carlo Alberto De Casa, market analyst at Kinesis Money, in a research note.
“Secondly, the fundamental basis for gold demand appears relatively solid, indicating that there won’t be a significant decline,” he wrote. He makes the case, pointing partly to Thursday’s trade, that gold investors have been bargain hunting the asset, buying following significant dips.
“This sudden rebound may show that sellers are losing power and therefore, buyers are trying to invest during a dip, now viewing gold as a more attractive choice after the recent decline,” De Casa wrote.
Meanwhile, silver for December delivery
SIZ21,
was up 17 cents, or 0.8%, higher at $22.22 an ounce, following a 2.6% rally a day ago. In September, silver saw a decline of over 8.2%, the steepest monthly fall since September of 2020, contributing to a quarterly drop of nearly 16%, marking its most severe quarterly decline since the first quarter of 2020.
