Gold prices headed slightly lower Thursday morning, retreating from a record rally that has seen the precious metal notch nine consecutive days of gains.
Bullion prices were supported Wednesday following the Federal Reserve signaling that it planned to keep the low interest rate environment in place for the foreseeable future as the U.S. economy recovers from COVID-19. Benchmark federal-funds futures rates stand at a range between 0% and 0.25%.
However, some analysts make the case that gold prices may be entering a period of consolidation following a historic run-up that has been at least partly prompted by the public-health crisis, but also exacerbated by a recent bout of weakness in the U.S. dollar and the low yields being offered by government debt.
One measure of the dollar, the ICE U.S. Dollar Index, is hanging around its lowest level in two years and the yield for the 10-year Treasury note is around 0.55%.
“The market has arguably overextended itself in the short term and gold is clearly overbought,” wrote Ross Norman, CEO at MetalsDaily.com, in a daily note.
“It is due a period of consolidation which would confer longer term strength in the price. That is assuming gold behaves in its normal, rational and sober manner,” he wrote.
August gold was trading $14.70, or 0.7%, lower at $1,938.70 an ounce, after settling at a record on Wednesday, marking its ninth straight advance, which is its longest win streak since a 10-session climb ended in January.
However, global gold demand declined in the second quarter and first half of this year overall, but demand for gold as an investment climbed to a record as exchange-traded-fund holdings reached an all-time high by the end of June, according to a report from the World Gold Council published Thursday.
Meanwhile, September silver tumbled $1.16, or 4.8%, at $23.175 an ounce, following a less than 0.1% gain on Wednesday.
In economic news, commodity traders digested important data on jobs and the U.S. economy’s GDP that could influence gold prices on Thursday.
A first reading on U.S. gross domestic product for the second quarter confirmed the pandemic pummeled the economy. GDP fell at a 32.9% annualized pace, the Commerce Department said, a bit better than the 34.6% annual decline forecast in a MarketWatch survey, but still the worst in history.
Separately, first-time claims for unemployment benefits rose slightly last week, to 1.43 million from an upwardly-revised 1.42 million, while continuing claims also rose to 17 million in the week ended July 18.