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Gold futures edged lower on Friday, heading for a second weekly loss in a row, with traders looking to discussions on the U.S. coronavirus relief package in Congress, moves in the dollar and the upcoming presidential election for the metal’s next big catalyst.
The precious metal had traded higher in early Friday dealings, with hope for a coronavirus relief package in Washington that could provide a lift to buyers of bullion hedging against growing government budget deficits. Prices then moved lower after readings on the IHS Markit PMI indexes for the service and manufacturing sides of the economy rose in October.
“Over the past three weeks, the metal has found comfort within a $50 range thanks to a variety of themes ranging from a softer dollar, rising coronavirus cases across the globe, pre-election jitters and uncertainty over the U.S. stimulus package,” Lukman Otunuga, senior research analyst at FXTM, told MarketWatch.
“The precious metal is likely to remain on standby until a fresh catalyst is brought into the picture,” he said.
December delivery GCZ20, -0.12% GOLD, -0.65% fell by $5.10, or 0.3%, to trade at $1,899.50 an ounce, following a 1.3% skid on Thursday. Gold was on track for a second-weekly loss, with the most-active contract trading down 0.3% this week, FactSet data show.
Silver for December delivery SIZ20, -0.36% SI00, -0.36% shed 3.9 cents, or 0.1%, to $24.67 an ounce, after shedding 2.1% in the prior session. Silver is on pace for a 1.1% weekly return.
Read: Why Goldman Sachs sees a 2021 bull market brewing for commodities
The status of coronavirus aid negotiations in Congress remains uncertain and details on the size and breadth of an additional relief package aren’t known.
House Speaker Nancy Pelosi, D-Calif., on Thursday said negotiations with Treasury Secretary Steven Mnuchin were “almost there,” but Senate Republicans have thus far been reluctant to support a spending plan of around $2 trillion. Senate Majority Leader Mitch McConnell, R-Ky., on Thursday refused to commit to a pre-election vote on an aid package.
White House economist, Larry Kudlow, said fiscal stimulus talks were barely moving Friday morning, the day House Speaker Nancy Pelosi had said the two sides should have text in hand if there was to be a vote before the elections Nov. 3.
The moves in precious metals come as long-date bond yields have been climbing to around their highest levels since June, with the 10-year Treasury note yield TMUBMUSD10Y, 0.837% at 0.85% in Friday dealings, compared with 0.744% last Friday afternoon. Government bonds can often compete with gold for haven demand and can attract greater demand when its yields rise.
However, gold this week has mostly moved somewhat in step with the U.S. dollar, both of which are seen as investment havens. The dollar was down 0.1% on Friday, contributing to its 0.9% weekly decline thus far, as measured by the ICE U.S. Dollar Index DXY, -0.09%, a gauge of the buck against a handful of currencies of major developed countries.
In a report released Friday, Cameron Alexander, director of precious metals research at Refinitiv, was upbeat on the outlook for gold.
“The underlying macroeconomic conditions such as economic headwinds, the low interest rate environment, ongoing tension between the United States and China, rising inflationary expectations and the looming second wave of COVID-19, remain highly favourable for gold in the medium-to-long term,” he said.
Refinitiv reported Friday that central banks became net sellers of gold for the first time in a decade in the third quarter of this year. It attributed the change to the “absence of purchases from Russia and China.”
Physical gold demand fell by 30% year on year to 562 metric tons in the third quarter, it said.
From a technical perspective, Otunuga said that “sustained weakness” below $1,910 for gold may open a path towards $1,890 and $1,858.
Still, “a softer dollar could encourage a breakout above $1,910, which may open the doors towards $1,935,” he said.
Among other metals traded on Comex, December copper HGZ20, -0.71% fell 0.6% to $3.135 a pound. It was up by more than 2% for the week after settling Wednesday at $3.199, the highest most-active contract finish since June 2018.
January platinum PLF21, +2.89% rose 3.7% to $916.40 an ounce, trading up over 5% on the week. December palladium PAZ20, -0.00% was down less than 0.1% at $2,394.90 an ounce, still on track for a weekly rise of over 2%.
