Gold futures are spiking to close out the trading week, allowing the precious metal to post a weekly gain. Gold prices have been on a downward spiral this month, driven by positive economic data and a potential tapering by the Federal Reserve. Is this the start of another bull run or part of the start-and-stop push of the metals market?
October gold futures surged $27.90, or 1.59%, to $1,779.70 per ounce at 16:46 GMT on Friday on the COMEX division of the New York Mercantile Exchange. The yellow metal is poised for a weekly gain of nearly 1%, paring its year-to-date loss to below 7%.
Silver, the sister commodity to gold, is also popping at the end of the trading week. September silver futures added $0.659, or 2.85%, to $23.775 an ounce. The white metal is on track for a weekly loss of 2.25%, adding to its 2021 decline of 10%.
The primary contributor to higher gold prices on Friday has been the University of Michigan’s consumer sentiment index. This plummeted to 70.2 in August, the lowest level since the early days of the COVID-19 public health crisis in April. This was also down from the 81.2 reading in July.
Meanwhile, a slumping greenback helped lift gold futures that, according to many market analysts, had been “oversold.” The US Dollar Index (DXY), which measures the dollar against a basket of currencies, plummeted 0.58% to 92.49, from an opening of 93.04. The index will endure a weekly dip of 0.3%. A weaker buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.
The bond market was also red across the board, with the benchmark 10-year yield down 0.065% to 1.302%. The one-year bill dipped 0.005% to 0.074%, while the 30-year bond slipped 0.07% to 1.956%. A sliding Treasury market is bullish for metals because it reduces the opportunity cost of holding non-yield bullion.
In recent weeks, it has become widely expected that the US central bank would begin trimming its $120-billion-a-month quantitative easing (QE) program. Because of higher inflation and a recovering labor market, several Fed officials are advocating for policy normalization and perhaps an interest rate hike by the end of the year.
For now, Fed Chair Jerome Powell has signaled that everything will remain the same, reiterating that he wants to see the coronavirus pandemic far in the rear-view mirror before tapering policy.
In other metal commodities, September copper futures rose $0.034, or 0.78%, to $4.394. September platinum futures added $9.70, or 0.95%, to $1,027.40 an ounce. October palladium futures picked up $35.40, or 1.34%, to $2,659.00 per ounce.