Gold futures moved higher in Friday dealings, a day after posting their sharpest daily loss in a week, as investors continue to digest the Federal Reserve’s monetary policy plans as well as a crackdown in China on cryptocurrencies.
Prices for the precious metal were poised to settle little changed from last Friday’s settlement.
China on Friday reiterated its crackdown on cryptocurrencies, with the People’s Bank of China stating that virtual currency doesn’t have the same legal status as legal currency.
The gold price will break past $1,840 resistance “if and when there is confirmation that China will eradicate cryptocurrencies,” Chintan Karnani, director of research at Insignia Consultants, told MarketWatch. There has to be more “clarity” on a potential crypto ban from China.
“History suggests that crypto currencies have risen sharply after any major price crash (irrespective of news), so it is wait and see for cryptocurrencies,” said Karnani.
December gold GCZ21, +0.21% GC00, +0.21% rose $3.20, or 0.2%, to trade at $1,753 an ounce on the session. The 1.6% drop on Thursday represented the sharpest one-day dollar and percentage decline for bullion since Sept. 16. For the week, gold futures traded less than 0.1% higher than last Friday’s settlement at $1,751.40, FactSet data show.
The bias for gold is still to downside, as the Federal Reserve’s statement on monetary policy and Fed Chair Jerome Powell’s comments from Wednesday are “digested by market,” Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch. The Fed taper of bond purchases “will commence by year end and [interest] rates will begin to tighten most likely in 2022.”
The Fed on Wednesday signaled its intent to “soon” taper its bond purchases and raise interest rates by late next year, which could dim appetite for bullion if investors shift to assets that offer yields. The central bank’s projections of interest-rate increases also pointed to rate increases as early as 2022, which could also dent demand for precious metals.
Still, gold is finding some support though from a “risk-off” sentiment in the U.S. equity markets Friday, due to China property giant Evergrande’s 3333, -11.61% interest payment miss and possibility of spread in the Chinese economy, which could impact the U.S. economy, in time, said Wright.
Read The Wall Street Journal: Evergrande bondholders in the U.S. didn’t receive interest payment
“The indirect exposure is a risk currently being factored in,” Wright said. So, “there is a small appetite for safe-haven gold….but I believe it is short lived.”
Looking ahead, analysts said that absent a near-term catalyst, gold may be more influenced by U.S. dollar moves and risk appetite.
“Moving forward, investors should understand that, unless anything noteworthy happens to the dollar index, gold prices will likely be influenced more by investors’ risk appetite,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a daily note.
The dollar was up 0.1% on the week and down 0.2% on Friday, as measured by the ICE U.S. Dollar Index DXY, -0.21%, a measure of the buck against a half-dozen currencies.
Meanwhile, silver for December delivery SIZ21, -0.99% SI00, -0.99% was trading 21.4 cents, or 0.9%, lower, at nearly $22.47 an ounce, following a 1% decline on Thursday. For the week, silver is up 1.5%.
Precious metals also decline don the back of strength in U.S. Treasury yields, with the 10-year Treasury note TMUBMUSD10Y, 1.446% touching a high of 1.454% in Friday dealings. Rising rates can undercut demand for precious metals which don’t offer a coupon.
Among other metals traded on Comex, December copper HGZ21, +1.41% edged up by 1.5% to $4.30 a pound, trading over 1% higher for the week.
October platinum PLV21, -1.64% fell 1.8% to $979 an ounce, but looking at a weekly rise of over 5%. December palladium declined by 1.2% to $1,949 an ounce, contributing to a roughly 1.8% loss for the week.
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