Gold futures were headed lower again on Friday, with bullion on track to book its fourth decline in five sessions that could cement the asset’s worst weekly slide in about six months.
Some commodity experts have attributed the bout of weakness in precious commodities, and in particular gold, to the recent resurgence of the buck, which has made dollar-backed gold relatively more expensive to overseas buyers using other monetary units.
The dollar on Friday was climbing 0.2%, bringing its weekly rise to about 1.7% and on track for the sharpest such gain since the week ended April 20, as measured by the ICE U.S. Dollar Index, FactSet data show.
December gold was headed $12.60, or 0.7%, lower at $1,864.30 an ounce, at last check, more than erasing its 0.5% gain from the previous session and pushing the metal toward a two-month low and a 5% weekly drop. A weekly slide of that magnitude would be its steepest since the period ended March 13.
“Gold dropped to a two-month low, coinciding with USD strength, and US real yields reaching a two-month high, weighing on investor flows,” wrote analysts at UBS in a research note.
The analysts said that communications from the Federal Reserve over the past week haven’t signaled sufficient dovishness to support gold values.
That said, the analysts view the backdrop of coronavirus that has engendered uncertainty about the global economic outlook and rising concerns about the 2020 presidential election in the U.S., between former Vice President Joe Biden and President Donald Trump, as a potential floor to gold falling substantially lower.
“Further gold price weakness is possible, but US election uncertainties will likely intensify and the Fed will ultimately need to expand policy. Hence, we maintain our positive view on gold,” the UBS analysts wrote.
Meanwhile, December silver was trading 37 cents, or 1.6%, lower at $22.785 an ounce, after rising 0.4% on Thursday, pushing it to around its lowest levels since late July. Gold’s sister metal was headed for a weekly decline of a 16%, which would also mark its sharpest weekly drop since the week ended March 13.