By Myra P. Saefong and Mark DeCambre
Gold futures settled lower on Friday, as the U.S. dollar strengthened after losses this week, but prices for the precious metal tallied their largest weekly gain since mid-December.
“Concerns over new pandemic restrictions in China have triggered the risk-off mood, sending some investors towards the dollar’s safe embrace at the expense of gold,” said Lukman Otunuga, senior research analyst at FXTM.
Prices for gold may decline in the near term, but “expectations over more stimulus under Biden’s administration and reflation hopes may limit downside losses,” he told MarketWatch.
For now, “a fresh directional catalyst may be needed for gold to truly break away from the sticky $1,850” mark, said Otunuga. “This could be presented in the new week as investors brace for a series of key events and economic data from major economies.”
February gold /zigman2/quotes/210034565/delayed GC00 -2.39% lost $9.70, or 0.5%, to settle at $1,856.20 an ounce, after trading as low as $1,836.30.
Silver for March delivery /zigman2/quotes/210315219/delayed SI00 -3.56% /zigman2/quotes/211961204/delayed SIH21 -3.54% fell 30 cents, or nearly 1.2%, to end at $25.556 an ounce, following a 0.3% gain in the prior session.
Gold saw a weekly gain of 1.4%, the first in three weeks and largest weekly climb since the period ending Dec. 18, FactSet data show, based on the most-active contracts. Silver logged a 2.8% rise.
The dollar traded up 0.1% on Friday as gold futures settled, setting it up for a weekly decline of about 0.6%, but the index also was up 0.3% month to date, as gauged by the ICE Dollar Index /zigman2/quotes/210598269/delayed DXY +0.88% .
A stronger dollar can make assets priced in the currency comparatively more expensive for overseas buyers.
Gold’s weekly rise also follows the installation of a new Democratic president, making “further fiscal stimulus more likely in the near future,” Jason Teed, co-portfolio manager of the Gold Bullion Strategy Fund, told MarketWatch.
Newly inaugurated President Joe Biden put forth a $1.9 trillion spending plan to combat the pandemic, though it is unclear how much of that will pass Congress.
Additionally, interest rates are expected to remain low to support the economy through the end of the pandemic, said Teed.
“While there has been some political unrest and uncertainty in the U.S. in the past few weeks, Wednesday’s inauguration put much of that fear to rest, and confirmed that tailwinds for the metal will remain in place,” he said.
And in the near term, fiscal stimulus and the attitude of the Federal Reserve “under a new executive administration will be a major focus of traders, as well as a robust Covid-19 response, which would be a boon for the economy, but less attractive for safe-haven assets and stores of value,” he said.
U.S. economic data Friday were upbeat, likely dulling some haven demand for gold, with the IHS Markit PMI indexes for the service and manufacturing sides of the economy both improving this month.
The index for services, such as banks, hospitals and retailers — by far the largest sector of the economy — rose to a two-month high of 57.5 in January from 54.8 in the prior month. The index for the smaller, but still sizable U.S. manufacturing sector, climbed to a record 59.1 from 57.1.
In other metals trading Friday, March copper /zigman2/quotes/210055581/delayed HGH21 -3.94% shed 0.6% to end at $3.626 a pound, for a weekly rise of around 0.7%. April platinum /zigman2/quotes/216224626/delayed PLJ21 -3.14% lost nearly 1.5% to $1,111.60 an ounce, but was up 2% for the week, while March palladium shed 0.4% to $2,365.20 an ounce, down almost 1.3% for the week.