By Myra P. Saefong and Mark DeCambre
Gold futures finished Friday with a modest gain, but posted 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 traded in a tight range Friday, moving up in early 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 /zigman2/quotes/210039572/delayed GCZ20 +2.13% /zigman2/quotes/201432642/composite GOLD +2.98% rose 60 cents, or 0.03%, to settle at $1,905.20 an ounce, following a 1.3% skid on Thursday. Gold logged a second-weekly loss, though the most-active contract was down by less than 0.1% from last Friday’s settlement, FactSet data show.
Silver for December delivery /zigman2/quotes/210319381/delayed SIZ20 +6.75% /zigman2/quotes/210315219/delayed SI00 +6.76% shed 3 cents, or 0.1%, to $24.675 an ounce, after shedding 2.1% in the prior session. Silver still gained 1.1% for the week.
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 /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +10.22% at 0.84% 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 0.2% on Friday, contributing to its nearly 1% weekly decline thus far, as measured by the ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY -0.74% , 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 /zigman2/quotes/210059538/delayed HGZ20 +1.91% fell 0.7% to $3.129 a pound. It was up by 2% for the week after settling Wednesday at $3.199, the highest most-active contract finish since June 2018.
January platinum /zigman2/quotes/214899298/delayed PLF21 +4.26% rose 2.6% to $906.70 an ounce, settling up 4.3% on the week. December palladium /zigman2/quotes/214428583/delayed PAZ20 +0.89% added 0.1% at $2,398.60 an ounce, for a weekly rise of 2.4%.