Gold prices declined 2% on Friday, pushing prices lower for the week, as a stronger better-than-expected rise in June U.S. jobs dulled expectations for interest-rate cuts and lifted the benchmark dollar index to a more than two-week high.
“The sell off in the gold price is mainly because investors are thinking that the [Federal Reserve] has less reason to be aggressively dovish,” said Naeem Aslam, chief market analyst at ThinkMarkets.
August gold GCQ19, -2.17% gave up $28.10, or 2%, to trade at $1,392.80 an ounce, after settling at $1,420.90 an ounce on Comex Wednesday, the highest for a most-active contract since May 14, 2013, according to FactSet Data. Regular trading was shut on the Independence Day holiday Thursday.
Read: Why gold prices have climbed to their highest since 2013
Friday’s losses put gold on track to post a weekly loss of 1.6%, on the heels of two consecutive weeks of gains, according to FactSet data.
The U.S. added 224,000 new jobs in June, data showed on Friday. That easily beat the 170,000 forecast of economists polled by MarketWatch.
The jobs data indicate that “a July rate cut is a done deal is anything but,” said Michael Hewson, chief market analyst at CMC Markets UK, wrote in a market update. “The Fed could still cut rates this year. However, any more data like today will make a July rate cut a much more difficult argument to make.”
Higher U.S. interest rates can boost the dollar and dull demand for dollar-denominated commodities, while lower interest rates can do the opposite.
On Friday, the ICE U.S. Dollar Index DXY, +0.63% traded up 0.6% at 97.327, trading at its highest in more than two weeks.
Concerns about the impact of sluggish growth across the globe and a contentious market-rattling trade dispute between the U.S. and China have been the main drivers for haven debt, including government debt and precious metals. The Federal Reserve has cited the trade dispute and its impact on the domestic economy as a reason to consider dialing back rates, which also has lent buoyancy to gold prices recently.
On Friday, the yield on the 10-year German bond TMBMKDE-10Y, +12.69% or bund, was at minus 0.345%, hovering at record lows for the benchmark European bond. Comparable U.S. Treasury yields TMUBMUSD10Y, +5.33% meanwhile, were up at 2.0558%.
Lower yields for government paper can underpin demand for gold, which doesn’t offer a yield; conversely, as debt rates rise, investors must assess the benefits of havens like gold against the perceived safety of bonds.
On the technical front, gold’s “inability to break past $1,455 key resistance resulted in profit taking of long positions and subsequent intra-day shorts getting built,” said Chintan Karnani, chief market analyst at Insignia Consultants. “Now gold needs to trade over $1,378 (previous resistance) to continue its short term bullish zone.”
Still, “long term bullish factors are intact” for gold, he said.
Elsewhere on Comex, September silver SIU19, -2.26% dropped 31.1 cents, or 2%, at $15.025 an ounce, poised for a 2% weekly skid. September copper HGU19, -0.89% traded at $2.658 a pound, down 1% in Friday dealings—looking at a weekly loss of 2.1%.
October platinum PLV19, -3.91% lost 3.6% to $813.30 an ounce, trading 3.3% lower for the week, while September palladium PAU19, -0.77% shed 0.7% to $1,555.50 an ounce, still up 1.2% for the week. On Wednesday, most-active palladium futures logged their highest Comex settlement on record.
Read: Gold, palladium compete for the title ‘most precious metal’
Exchange-traded fund SPDR Gold Shares GLD, -1.87% traded 2% lower, on track for a weekly loss of 1.7%.
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