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Metals Stocks: Gold ends lower, but prices log strongest weekly gain since early September

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Gold futures ended lower on Friday, as strength in Treasury yields and the U.S. stock market help lead prices to their first loss in four sessions, but the precious metal still notched its best weekly advance in six weeks.

The selloff Friday followed gold’s inability to hold above $1,800, as well as speculation surrounding the launch of a bitcoin futures ETF possibly next week, which may prompt some short-term gold traders to shift to bitcoin, Chintan Karnani, director of research at Insignia Consultants, told MarketWatch.

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He expects to see a wider trading range of $1,740 to $1,820 for gold prices next week, and said gold will “crash” only if $1,820 is not broken during next week’s trading.

Karnani said he remains bullish on gold for next week, and “will prefer a buy on crashes strategy.”

December gold
GCZ21,
-1.60%

GC00,
-1.60%

fell nearly 1.7%, or $29.60, to settle at $1,768.30 an ounce on Comex, after picking up 0.2% on Thursday and settling at the highest since Sept. 14, FactSet data show.

For the week, gold gained 0.6%, which marked its steepest weekly climb since the week ended Sept. 3.

The move up for the week is “not a bad move considering investment demand has been so weak,” Ross Norman, chief executive officer at Metals Daily, told MarketWatch. “My sense is the market needed to move higher after the jobs data miss (NFPs) but wanted to see what the CPI data showed before moving higher.” The consumer price index reading released Wednesday showed a climb to 0.4% in September.

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Suggestions that the Federal Reserve may taper asset purchases by $15 billion a month “may perversely have helped too,” he said. “A case of selling the rumour and buying the fact insofar as the taper is less dramatic than perhaps some had feared.” 

Overall, “we have seen a welcome move in gold and much now depends upon building further momentum,” said Norman. Meanwhile, “silver’s move has authenticated the move in gold.”

December silver
SIZ21,
-0.52%

SI00,
-0.52%

lost 13 cents, or nearly 0.6%, to $23.349 an ounce, but prices were up around 2.8% for the week.

Gold’s gains over the week have been tenuous, analysts say, but partly supported by a more subdued dollar and some retreat in yields for government debt even though the Federal Reserve plans to start to wind down its bond buying program now that the economy is recovering from the pandemic.

The 10-year Treasury note yield
TMUBMUSD10Y,
1.575%

was at around 1.57% Friday, up for the session, but down compared with 1.604% at the end of last week. Meanwhile, the dollar, as gauged by the ICE U.S. Dollar Index, was down 0.1% on the week.

Weakness in bond yields and the dollar for the week have provided a pathway higher for assets, such as gold, which are priced in dollars and that don’t offer a coupon like government debt.

Still, gold gave back most of its gain for the week on Friday, “with investors choosing the racier equity markets over the haven asset,” said Fawad Razaqzada, market analyst at ThinkMarkets.

The metal “remains stuck inside its existing ranges as investors wonder whether bond yields and the dollar will resume higher,” with the Fed seen tapering its bond purchases program in mid-November or mid-December,” he told MarketWatch. “Other investors will be happy to buy the dips as the metal is considered to be a good hedge against inflation.”

Gold held at lower levels early Friday after a report on U.S. retails sales for September showed a climb of 0.7% on the month, above forecast. Retail sales, excluding autos and gas prices, increased 0.8% on the month. Separately, a reading of business conditions in the New York area, the Empire State Manufacturing Index fell to 19.8 in October.

Gold prices briefly pared some of its losses after preliminary estimate of the index of consumer sentiment released Friday by the University of Michigan showed a decline to 71.4 in October from 72.8 in September.

The sharp rise in U.S. September retail sales and its impact will be limited, said Karnani, and a rise in base metals prices will limit gold’s price fall.

On Comex, December copper
HGZ21,
+1.85%

added 2.1% to nearly $4.73 a pound, ending nearly 11% higher for the week. January platinum
PLF22,
+0.87%

rose 0.6% to $1,058.90 an ounce, for a weekly rise of around 3%, but December palladium
PAZ21,
-3.67%

settled at $2,076.60 an ounce, down almost 3.5% in Friday dealings, but up 0.2% for the week.

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