The Gold Market
Gold dipped nearly 2% on Friday, snapping its record-breaking rally, after a slightly better-than-expected U.S. jobs report boosted the dollar, but a worsening pandemic kept prices on track for their longest streak of weekly gains in about a decade.
Spot gold fell 1.5% to $2,031.69 per ounce by 10:39 a.m. EDT (1439 GMT), after hitting a record high of $2,072.50. It has added 2.8% so far this week for what would be its ninth straight weekly gain.
U.S. gold futures slipped 1.5% to $2,031.69.
"The dollar rebounded quite strongly after the jobs report. That clearly caused a bit of a sell-off across the board in the metals sector," said David Meger, director of metals trading at High Ridge Futures.
"The thought process would be that with the slightly better than expected jobs number, the economy is slowly regaining its footing and, hypothetically, we would then see a lesser need for stimulus." The dollar .DXY strongly rebounded from a two-year low, after the U.S. nonfarm payrolls increased by 1.763 million jobs last month and on renewed U.S.-China tensions.
Safe-haven gold has risen 34% this year amid surging COVID-19 cases, which have battered global economies and prompted unprecedented stimulus measures.
Meanwhile, U.S. Democratic leaders and White House officials failed to make substantial progress on a new coronavirus aid bill.
"Once they agree on a stimulus it'll be bearish for the dollar. The global economy is still very wobbly and as a result we're going to get a lot more easy money, so all that is tailwind for gold," said Edward Meir, analyst at ED&F Man Capital Markets.
Gold can still end the year at $2,200-$2,300, he added.
Elsewhere, silver slid 4.6% to $27.62 per ounce, having earlier hit its highest since February 2013 at $29.84. It has gained about 13.6% so far this week.
Platinum dipped 5.2% to $946.16, while palladium declined 4.7% to $2,116.16.
PRECIOUS – Gold races to new record after blowing past $2,000/oz
-Silver rises to more than 7-year high
-Dollar index hovers near two-year lows
-Washington remains deadlocked over a relief package
-Gold prices rocketed to a new record high on Wednesday after smashing past $2,000 for the first time, as a weaker dollar and falling returns on U.S. bonds drove investors to hoard the safe-haven metal.
Gold has soared 34% this year and is one of 2020's best performing assets, with investors buying vast amounts in the hope it will hold its value as the coronavirus pandemic upends markets.
Breaking above $2,000 for the first time on Tuesday and hitting a new high of $2,055.10 an ounce earlier on Wednesday, spot gold was up 1% at $2,037.81 by 12:33 am EDT (1633 GMT).
U.S. gold futures climbed 1.4% to $2,048.30.
Investors fear economic stimulus unleashed in response to the pandemic will trigger inflation that will devalue other assets. Real returns on U.S. bonds have already fallen sharply, making non-yielding gold more attractive.
"We're seeing an ongoing deterioration in the U.S. dollar, U.S. yield curve dropping further and an increase in inflation expectations," said Bart Melek, head of commodity strategies at TD Securities.
"This implies that for the foreseeable future, the opportunity cost of holding gold is going to get less and less."
Deadlock in Washington over a coronavirus relief deal helped weaken the dollar, which competes with gold as a safe haven. A lower dollar also makes gold cheaper for buyers with other currencies.
Inflation-adjusted U.S. 10-year bond yields fell to minus 1.06% from 0.15% at the start of the year.
Gold has rallied so fast – leaping more than $200 in a little over two weeks – that a correction is due, said Robin Bhar, an independent analyst. Any rebound in Treasury yields and strengthening of the dollar would stall gold's rally and push prices lower, he said.
Silver prices also surged, jumping 4.4% to $27.13, the highest since April 2013 and was last up 2.3% to 26.60. It has now risen 48% this year, outperforming even gold.
"Silver is gaining on three factors, as a monetary asset like gold, industrial demand improvements as we recover from COVID and stimulus and supply side problems," Melek said.
Elsewhere, platinum rose 2.4% to $959.97 and palladium was 0.7% higher at $2,155.14.