Gold and silver have worst weeks since March on rising dollar
Gold and silver posted their biggest weekly losses since March, when the global onset of the coronavirus pandemic panicked markets.
Increase ad revenue 50-250% with Ezoic
The dollar gained as concern over the outlook for global economic growth bolstered the appeal of the currency as a haven, sapping demand for gold. Fears are mounting that rising coronavirus cases, particularly in Europe, may lead to more national lockdowns, denting the outlook for recovery. Gold fell 4.6% this week, while silver slumped 15%.
“Both have succumbed to belated long liquidation and pressure generated by the strength in the general dollar index, which is on track for its biggest weekly gain in almost six months,” Edward Meir, an analyst at ED&F Man Capital Markets in New York, said in a note.
Bloomberg
The rally in gold, often used as an inflation hedge, has also flagged as the dimming view of the recovery undercuts the outlook for a rise in consumer prices. A lineup of Federal Reserve officials have said the central bank alone can’t boost prices and the economy would falter without more aid. Gold has fallen more steeply of late than currency exchange-rate developments would have led one to expect, said Commerzbank AG’s Carsten Fritsch.
“Abating concerns about inflation due to rising corona numbers could have something to do with this,” Fritsch said in a note.
U.S. House Democrats have started drafting a stimulus proposal of roughly $2.4 trillion that they can take into possible negotiations with the White House and Senate Republicans. The bill could get passed by the House next week.
Gold fell 0.3% to close at $1,861.58 an ounce at 5 p.m. in New York. Silver slipped 1.1%. Platinum also declined in its worst week since March, while palladium had the biggest weekly slide since July.
The Bloomberg Dollar Spot Index climbed 0.3% and registered its best week since April.
Gold’s slump could prove temporary with increased uncertainty over the U.S. presidential election. Any added conflict in the run-up to the vote should help lift the precious metal, according to RBC Capital Markets strategist Christopher Louney.
“The U.S. election cycle and any potential transition as well as heightened geopolitical tensions remain amid economic uncertainty,” he said in a note. “The recent moves open up room for gold to move higher more materially” in the next two quarters, he said.
By Eddie Spence
David