Gold suffers largest weekly loss in more than 3 years
Copper scores nearly 11% weekly gain on bets for infrastructure demand
Gold futures dropped Friday to mark their lowest finish since June, as strength in the U.S. dollar and equities this week, and growing expectations for a Federal Reserve interest-rate increase next month, fueled the largest weekly decline in more than three years.
Copper futures, meanwhile, saw a weekly climb of nearly 11%, which was the largest in over five years, as traders bet that policies expected to be pursued by Republican Donald Trump’s administration could feed demand for industrial metals.
Gold futures for December delivery GCZ6, -3.36% fell $42.10, or 3.3%, to settle at $1,224.30 an ounce—the lowest close since early June, according to FactSet data.
For the week, prices lost roughly 6.2%, the largest since the week ended June 21, 2013, when they dropped about 6.9%.
“Gold, a noninterest-bearing and dollar-denominated asset, has basically been THE victim of a sharp rise in both the dollar and equity prices, which have responded surprisingly positively to the outcome of U.S. elections,” said Fawad Razaqzada, technical analyst at Forex.com.
The ICE U.S. Dollar Index DXY, +0.20% was up 0.2% in Friday dealings, poised for a weekly gain of 2.2%.
“The only certainty before Tuesday’s U.S. election was that a victory for Trump would hurt stock markets and send gold soaring,” said Adrian Ash, head of research at BullionVault. “That proved right for just 12 hours. One ghosted speech and a few days off Twitter was all it took for money managers to pile back into equities and dump gold.”
Still, “this week’s surge and drop in gold simply reflects in miniature what the metal tends to do for investors longer-term, offsetting losses in equities but easing back when stock markets do well,” he said.
U.S. equities were mixed Friday as gold futures settled, but were set to post broad gains for the week, with the Dow Industrials DJIA, +0.23% up 5% week to date after posting a record close on Thursday.
“Money flows quickly turned risk-on” after the election and “gold has since collapsed,” Tyler Richey, co-editor of The 7:00’s Report, told MarketWatch.
Despite all of the “discouraging” price action, Richey said he’s “not throwing in the towel on our long call just yet as we still see the risk reward of being long gold here is favorable.”
However, it is “critical for the health of the relatively young uptrend in gold,” where technicals turned bullish April, that price support on the charts holds between $1,200 and $1,220, he said.
Meanwhile, a rate increase is expected at the central bank’s mid-December meeting. Higher rates are typically gold-negative due to the nonyielding metal’s opportunity cost in a rising-rate climate.
On Friday, Federal Reserve Vice Chairman Stanley Fischer signaled his support for gradual interest-rate hikes, saying in a speech that “the case for removing accommodation gradually is quite strong.”
Industrial metals
Among the industrial metals, prices copper ended lower Friday, but saw a weekly gain of nearly 11%.
Improvement of roads, airports and ports are among the projects Trump has previously said he wants to tackle and that would boost demand for copper and other industrial metals.
December copper HGZ6, -1.67% shed 4.2 cents, or 1.7%, to $2.509 a pound, but for the week was up roughly 10.8%. The weekly percentage gain was the largest since the week ended Oct. 28, 2011, according to FactSet data.
Still, Forex.com’s Razaqzada noted that “the assumption that Trump will somehow boost demand for industrial metals sounds quite strange to me.”
After all, base metals—copper in particular—had been rallying days before the U.S. elections, he said. Copper futures had posted gains in each session since Oct. 24 through Nov. 10.
“Copper’s rally must therefore be due to hopes that the Chinese demand is recovering or expatiations of a tighter market,” said Razaqzada.
Meanwhile, silver failed to post gains this week, though its loss is smaller than that of gold’s.
“Silver has a split personality in that it can trade in sympathy with both the industrials like copper or precious varieties like gold,” said Tyler.
December silver SIZ6, -7.54% dropped $1.355, or 7.2%, to $17.382 an ounce, the lowest finish since early October. Silver logged about a 5.4% weekly loss.
January platinum PLF7, -4.00% sank by $39, or 3.9%, to $943.20 an ounce, down about 6.1% on the week. December palladium PAZ6, -3.43% fell $11.80, or 1.7%, to $684.70 an ounce, but was up 9.6% for the week.
Among the exchange-traded funds, the SPDR Gold Trust GLD, -2.30% fell 2.8%, trading down 6.5% for the week, while the VanEck Vectors Gold Miners ETF GDX, -7.69% lost 7.7%, set to lose more than 16% for the week.
Courtesy of marketwatch.com