Gold futures headed lower on Friday for a third straight session, on track to log a weekly loss of around 2%, as better-than-expected monthly U.S. employment data helped to strengthen the U.S. dollar.
There was “decent progress” for all U.S. economic numbers released Friday, said Naeem Aslam, chief market analyst at AvaTrade.
The U.S. regained 1.4 million jobs in August and the unemployment rate posted a surprisingly large decline to 8.4% from 10.2%, marking a fourth straight decline.
The fact is that unemployment rate is headed in the right direction, and is now in “single-digit territory,” said Aslam, in a market update. “This is positive for the U.S. economy,”
Still, the “data wasn’t about the [Federal Reserve] shifting its stance on the monetary policy,” he said. “It was more about fiscal help in terms of the second stimulus. The data has confirmed that we still need more help on the fiscal side.”
And the “absence of fiscal help means more layoffs in the coming weeks and possibly higher bankruptcies,” Aslam said.
December gold fell by $6.60, or 0.3%, to trade at $1,931.20 an ounce, after sliding almost 0.4% on Thursday to market its lowest finish for a most-active contract since Aug. 27, according to FactSet data.
December silver, meanwhile, declined by 10.5 cents, or 0.4%, at $26.77, an ounce, following a 1.9% decline in the previous session.
For the week, gold is on pace to see a more than 2% weekly fall, according to FactSet data, while silver is on pace for a 3.6% drop from last Friday’s most-active contract settlements.
The moves for precious metals come as investors have unwound bullish bets in equities and repositioned their overall portfolios amid expectations for further turbulence in financial markets.
Declines in the past 24 hours, come as stocks erased their gains for the week which may have sent traders scrambling to cover losses by selling other assets, including gold.
The economy will “need to see continued strength in the months ahead to make the FOMC believe the recovery in the jobs market is sustainable,” said Fawad Razaqzada, market analyst at ThinkMarkets. However, this “alone won’t cut it – not when many economists agree that the pace of hiring will slow down in the months ahead, with the potential for the economy to dip again as the impact of past government stimulus wanes.”
Given that, Razaqzada believes “monetary policy will likely remain loose for an extended period of time” and gold should “remain fundamentally supported in the long-term.” Short term, some weakness for gold cannot be ruled out, he said in a note.
Elsewhere on Comex, December copper traded at $3.01 a pound, up 1.2% in Friday dealings, with most-active contract prices down around 0.3% for the week.
October platinum rose 1.6% to $903.90 an ounce, trading roughly 3.9% lower for the week, while December palladium shed 0.2% to $2,316.40 an ounce, on track for a weekly rise of 3.7%.
“It is possible that palladium is once again being seen as an attractive alternative to gold considering its general precious metals classification,” analysts at Zaner Metals wrote in a daily report. “However, it is more likely that palladium is being lifted because the ongoing recovery in China is starting to foster chatter than Chinese auto sales have turned up thereby increasing auto catalyst demand.”