Gold futures moved lower on Friday, with prices on track to tally a third consecutive session loss and a second weekly decline in a row, as the U.S. dollar strengthened for a second week ahead of the Federal Reserve’s policy meeting next week.
“Gold had a bad week and its price action may be its way of front running an increasing likelihood that the reflation trade is coming back to finish off 2021,” Michael Armbruster, managing partner at Altavest, told MarketWatch, pointing out that Hedgeye had made that macro forecast. “Unfortunately for gold bugs, gold tends to trade lower in a reflationary economic regime because Treasury yields tend to rise.”
Meanwhile, what the Federal Reserve does at its meeting next week is “anyone’s guess, but expectations are not for a tapering announcement,” said Armbruster. “That is expected in a future meeting.”
Against that backdrop, December gold
declined by $4.10, or 0.2%, to trade at $1,752.60 an ounce, following a 2.1% decline on Thursday, marking the steepest daily percentage decline for bullion since Aug. 6 and its lowest settlement since Aug. 12.
Bullion was also headed for a second straight weekly drop, down over 2% for the week. That would mark its first successive weekly fall since the three-week period ended June 18, FactSet data show.
A better-than-expected report on U.S. August retail sales on Thursday was partially credited with boosting the dollar and weakening bullion.
“Yesterday’s losses came as a result of the inverted correlation between the precious metal and the US dollar, as the currency received an unexpected boost after the publication of US retail sales that surprised to the upside when the consensus had been for a contraction,” wrote Ricardo Evangelista, senior analyst at ActivTrades, in a daily report.
Retail sales increased 0.7% last month, and economists polled by The Wall Street Journal had forecast a 0.7% drop. That data, along with a batch of others, is raising the prospect that the Fed during its Sept. 21-22 meeting could aim to announce a tapering of its bond buying program that was implemented to provide liquidity to the market during the worst of the COVID disruptions last year.
In economic news Friday, the University of Michigan consumer sentiment index rose to 71 in September from 70.3 in prior month. The increase was a bit below market expectations.
The dollar traded higher after the data, though by a modest 0.1% in Friday dealings, contributing to a weekly gain of 0.4%, as measured by the ICE U.S. Dollar Index
Evangelista said that over the longer term, evidence of an economic rebound in the U.S. “aids the case for those arguing for earlier tapering and therefore supports the US dollar, a scenario which could lead to further gold weakness.”
Meanwhile, December silver
was down 24.4 cents, or 1.1%, at $22.55 an ounce, following a 4.2% decline on Thursday, when it logged the lowest finish since November 2020. For the week, silver traded around 5.7% lower.
edged down by 0.3% to $4.27 a pound, on track for a weekly loss of over 4%.
tacked on 2.2% to $943.70 an ounce, paring its weekly decline to around 1.4%. December palladium
lost 1.2% to $1,997.50 an ounce, set to lose 6% for the week after settling on Tuesday at the lowest since July of last year.