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Metals Stocks: Gold prices fall, poised for first weekly loss in 5 weeks

Gold futures headed lower on Friday, on track to post their first weekly loss in five weeks, as Treasury yields bounced and the U.S. dollar edged higher.

The dip in gold prices is “no surprise given an uptick in Treasury yields,” Michael Armbruster, managing partner at Altavest, told MarketWatch. “However, long-dated Treasury yields are trending lower and that is bullish for gold.” 

Gold for August delivery
GC00,
-0.15%

GCQ21,
-0.15%

fell $9.20, or 0.5%, to $1,796.20 an ounce on Comex. September silver
SIU21,
-0.44%

was down 31 cents, or 1.2%, at $25.07 an ounce. For the week, gold was headed for a 1.1% loss, while silver traded down 2.8%, according to FactSet data.

“Any dip in gold below $1,800 is an opportunity for gold bugs to add to their long position,” said Armbruster.

Gold’s loss for the week follows choppy trading in many financial asset markets. A steep selloff in equities and other assets viewed as risky to begin the week added to a safe-haven Treasury rally that drove the yield on the 10-year note
TMUBMUSD10Y,
1.289%

to a five-month lows.

Investors, however, rushed in to buy the dip in stocks, while the Treasury rally lost steam, allowing yields to rise. The greenback also firmed, with the ICE U.S. Dollar Index
DXY,
+0.13%

on track for a 0.3% weekly rise. Higher Treasury yields can raise the opportunity cost of holding nonyielding assets, while a stronger dollar makes commodities priced in the unit more expensive to buyers using other currencies.

“Choppiness elsewhere begets choppiness for gold, but we still think there are underappreciated downside risks for current prices, as our forecasts currently indicate,” said Christopher Louney, analyst at RBC Capital Markets, in a note.

“Economic data, Fed policy expectations, and news around prevailing COVID strains will continue to dominate both directly for gold and indirectly (through moves in the dollar, rates, and equities),” he wrote.

But with prices just below the middle of their one-year range and with ETP (exchange-traded product) flows giving back a significant share of their May rebound and thus still down significantly for the year to date, “the market remains largely unconvinced in gold prospects despite price gains and inflationary gold headlines,” Louney said.

Gold prices briefly traded back above the $1,800 mark in Friday dealings shortly after research firm IHS Markit said its preliminary composite output index for the U.S. fell to a four-month low of 59.7 in July, from 63.7 in June.

Rounding out trading on Comex, September copper
HGU21,
+0.92%

added 0.4% to $4.35 a pound, with most-active contract prices looking at a rise of 0.7% for the week.

October platinum
PLV21,
-2.94%

shed 4% to $1,047 an ounce, poised for a weekly loss of 5.5%, while September palladium
PAU21,
-0.89%

lost 1.3% to $2,669 an ounce, but trading up 1.2% for the week.

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