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Oct. 29, 2020, 2:30 p.m. EDT

Gold settles lower as U.S. GDP expands at a record pace and investors favor the dollar

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By Myra P. Saefong and Mark DeCambre

Gold futures ended lower for a second session, pressured by the U.S. dollar adding to its gains for the week while data revealed that the U.S. economy expanded at a record pace in the third quarter.]

The World Gold Council, meanwhile, reported a decline in total demand for gold in third-quarter to the lowest quarterly total in 11 years.

“Not unexpected, the euro freefall is providing the magnetic attraction to drag gold lower,” said Stephen Innes, chief global markets Strategist at online brokerage Axi, in a market update.

The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.0084% remained lower versus the dollar after the European Central Bank on Thursday said it was prepared to “recalibrate” its monetary stimulus programs in December. The fall in the euro contributed to strength in the dollar, with the ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY -0.23% , a measure of the buck against a half-dozen currencies of major-developed countries, up 0.7% in Thursday dealings, building on a more than 1% climb week to date.

Innes said a “mini repeat of the March lockdown sell-off,” is also of concern for gold. “If nationwide lockdown becomes the norm, the deflationary impulse and the ensuing dash for U.S. dollars could send gold down to $1,800,” he said.

December gold /zigman2/quotes/210039572/delayed GCZ20 +0.11% /zigman2/quotes/201432642/composite GOLD -0.22% fell $11.20, or 0.6%, to settle at $1,868 an ounce, following a 1.7% plunge for the commodity on Wednesday. Prices marked another finish at the lowest since Sept. 25, according to FactSet data.

Silver for December delivery /zigman2/quotes/210319381/delayed SIZ20 +0.56% /zigman2/quotes/210315219/delayed SI00 +0.60% ended roughly flat at $23.36 an ounce, a day after gold’s sister metal declined by 4.9%.

Overall global demand for gold dropped in the third quarter from a year earlier, but investment demand soared, according to data from the World Gold Council Thursday. 

Total gold demand fell by 19% in the third quarter year on year to 892 metric tons, the lowest quarterly total since 2009. Global gold investment for the quarter, which includes coins and bars and inflows into gold-backed exchange-traded funds, totaled 494.6 metric tons, up 21% from a year ago, the World Gold Council said.

In recent days, the ascent of the dollar and an atypical reluctance for government bond yields to fall has combined to diminish some appetite for gold and other precious metals in this recent stock-market selloff, some experts speculated.

The 10-year Treasury note yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y 0.00% , for example, was at around 0.78% and holding near its level from last Friday , despite a selloff that has seen the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.13% shed some 1,800 points in the past three sessions as of Wednesday, ahead of the U.S. presidential election on Nov. 3 between President Donald Trump and Democratic challenger Joe Biden.

“Gold and silver, thought by some to offer relative stability during times of market duress, fell sharply given the one-two punch of dollar and rates turning higher during the session,” wrote Mark Newton, an independent market technical strategist at Newton Advisors.

During resurgences of the viral coronavirus epidemic, dollars have attracted buyers and that has momentarily weighed on demand for gold, which is priced in the currency.

Gold prices also extended their declines after a report showed that U.S. gross domestic product expanded at a record 33.1% annual pace in the third quarter. Economists surveyed by MarketWatch predict a 33% spurt in annualized growth.

Weekly jobless claims , meanwhile, revealed a fall of 40,000 to 751,000, marking the fourth decline in the past five months.

In other Comex trading, December copper /zigman2/quotes/210059538/delayed HGZ20 +0.13% finished little changed, down a penny at $3.0565 a pound. January platinum /zigman2/quotes/214899298/delayed PLF21 +0.62% lost 2.9% to $849.50 an ounce and December palladium /zigman2/quotes/214428583/delayed PAZ20 -0.15% shed 2.3% to $2,198,50 an ounce.

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