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Metals Stocks: Gold futures slide, but prices eye strongest weekly gain since late August

Gold futures fell on Friday, on pace to halt a three-session climb, as Treasury yields and U.S. benchmark stock indexes rose, but the recent run-up in the precious metal set prices up to post the best weekly advance since August.

The selloff Friday followed gold’s inability to hold above $1,800, as well as speculation surrounding the launch of a bitcoin futures ETF possibly next week, which may prompt some short-term gold traders to shift to bitcoin, Chintan Karnani, director of research at Insignia Consultants, told MarketWatch.

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December gold
GCZ21,
-1.64%

GC00,
-1.64%

was trading 1.4%, or $25.60, lower at $1,772.30 an ounce on Comex, after picking up 0.2% on Thursday and settling at the highest since Sept. 14, FactSet data show.

For the week, gold is up 0.9%, which would mark its steepest weekly climb since the week ended Aug. 27.

The move up for the week is “not a bad move considering investment demand has been so weak,” Ross Norman, chief executive officer at Metals Daily, told MarketWatch. “My sense is the market needed to move higher after the jobs data miss (NFPs) but wanted to see what the CPI data showed before moving higher.” The consumer price index reading released Wednesday showed a climb to 0.4% in September.

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Suggestions that the Federal Reserve may taper asset purchases by $15 billion a month “may perversely have helped too,” he said. “A case of selling the rumour and buying the fact insofar as the taper is less dramatic than perhaps some had feared.” 

Overall, “We have seen a welcome move in gold and much now depends upon building further momentum,” said Norman.

Meanwhile, “silver’s move has authenticated the move in gold.”

December silver
SIZ21,
-0.50%

SI00,
-0.50%

lost 9.7 cents, or 0.4%, to $23.38 an ounce, but prices are up around 3% for the week.

Gold’s gains over the week have been tenuous, analysts say, but partly supported by a more subdued dollar and some retreat in yields for government debt even though the Federal Reserve plans to start to wind down its bond buying program now that the economy is recovering from the pandemic.

The 10-year Treasury note yield
TMUBMUSD10Y,
1.575%

was at around 1.57%, Friday, compared with 1.604% at the end of last week. Meanwhile, the dollar, as gauged by the ICE U.S. Dollar Index, was down 0.1% on the week.

Both factors have provided a pathway higher for assets, such as gold, which are priced in dollars and that don’t offer a coupon like government debt.

“Gold rallied to test the key $1,800 hurdle, where it was met with some resistance on Thursday. But will the metal be able to break this important resistance area today?” wrote Victor Argono, senior analyst at EXANTE.

Jim Wyckoff, senior analyst at Kitco.com, said that gold’s downside resistance level is closer to around $1,750, if investors are looking for a breaking point in the metal’s move.

“Bears’ next near-term downside price objective is pushing futures prices below solid technical support at this week’s low of $1,749.90,” the Kitco analyst wrote.  

Gold held at lower levels early Friday after a report on U.S. retails sales for September showed a climb of 0.7% on the month, above forecast. Retail sales, excluding autos and gas prices, increased 0.8% on the month. Separately, a reading of business conditions in the New York area, the Empire State Manufacturing Index fell to 19.8 in October.

Gold prices briefly pared some of its losses after preliminary estimate of the index of consumer sentiment released Friday by the University of Michigan showed a decline to 71.4 in October from 72.8 in September.

The sharp rise in U.S. September retail sales and its impact will be limited, said Karnani, and a rise in base metals prices will limit gold’s price fall.

On Comex, December copper
HGZ21,
+2.28%

added 2.4% to $4.742 a pound, trading nearly 11% higher for the week. January platinum
PLF22,
+0.65%

rose 0.6% to $1,058.50 an ounce, poised for a weekly rise of around 3%, but December palladium
PAZ21,
-3.41%

traded at $2,080.50 an ounce, down 3.3% in Friday dealings, but up 0.4% for the week.

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