Gold futures were under pressure early Friday for a third consecutive session, with commodity experts pointing to a resurgence in the U.S. dollar as the most likely culprit for bullion’s recent downtrend.
The dollar was up 0.5% early Friday, putting a measure of the buck against a half-dozen currencies, the ICE Dollar Index, on track for a weekly rise of 0.2%, prompted partly by comments from the Federal Reserve that implied that the central bank isn’t yet willing to implement unconventional strategies to hold interest rates lower for longer amid the COVID-19 pandemic.
“Gold bulls have been missing in action this week as investors digested the latest Fed minutes which temporarily injected life into the dollar,” wrote Lukman Otunuga, senior research analyst at FXTM, in a Friday note.
Still, the FXTM analysts sees the longer-term outlook for the yellow metal as strong.
“Regardless of recent losses, the fundamentals remain in favour of higher gold prices with a rebound potentially on the cards,” Otunuga wrote. He said that weakness in government debt rates, with the 10-year Treasury note yield TMUBMUSD10Y, 0.629% trading between a range of 0.80% and 0.60% in recent weeks, concerns about the outcome of the U.S. presidential election and the path for the economy in the aftermath of the race for the White House as bullish factors for bullion.
“A broadly weaker Dollar, negative US yields, pre-election jitters and rising coronavirus cases in the United States are likely to keep gold shining in the medium to long term,” he said.
On Thursday, former Vice President Joe Biden formerly accepted the Democratic presidential nomination and cast himself as a capable leader prepared to steer the nation out of the coronavirus pandemic, setting the stage in November for a battle with Republican incumbent President Donald Trump.
December gold GCZ20, -1.22% GC00, -1.22% headed $20.30, or 1%, at $1,926 an ounce, after declining 1.2% on Thursday. For the week, the precious metal is on pace for a 1.2% weekly skid. A weekly decline for gold would mark its first back-to-back weekly slide since the period ended March 20, according to FactSet data.
Meanwhile, September silver prices SIU20, -2.89% was 95 cents, or 3.4%, lower at $26.175 an ounce, after a decline of 0.7% a day ago, with gold’s sister metal looking at a 0.3% weekly slide.
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