Shutterstock
Gold prices slipped Friday by enough to hit a fresh 9-month low intraday and fatten a roughly 2% drop for the week after the dollar index notched its highest reading in over a decade.
The dollar has gained, although it did pause on Friday, amid increasing market confidence that the Federal Reserve will not only nudge interest rates higher next month but could lay the groundwork for even higher rates next year. Higher interest rates are typically negative for nonyielding gold and positive for the dollar, which can cut demand for precious metals priced in the greenback.
Gold futures for December delivery GCZ6, -0.50% fell $10.30, or 0.9%, to $1,179 an ounce, the lowest finish for the lead contract since the first week of February, according to FactSet data.
More from Mark Hulbert: Why gold hasn’t yet hit bottom
Comex-traded metals closed early on Black Friday, including a 12:30 p.m. Eastern Time closure for gold. See the full closing schedule here.
The ICE U.S. Dollar Index DXY, -0.19% , a measure of the dollar against six rivals, slipped 0.2% to 101.45, as investors cashed in on its recent run that took the index to its highest since April 2003.
“Although market participants in the U.S. may also exercise restraint today given that yesterday was a public holiday, their scepticism towards gold is very palpable,” said Carsten Fritsch, commodities analyst at Commerzbank, in a note. “We believe that the steep rise in interest rates in the U.S. is one of the main reasons for the latest gold price slide.”
Within two weeks, 10-year Treasury yields, a major benchmark for interest rates, climbed to 2.4% from 1.7%.
“Many market participants clearly expect the U.S. Federal Reserve to hike interest rates several times over the next few months as inflation looks set to rise in the wake of Donald Trump’s election victory, and are therefore selling gold,” Fritsch said.
Meanwhile, December silver SIZ6, +0.79% nosed higher by 7 cents, or 0.5%, at $16.465 an ounce Friday. Silver ended the week down 0.4% after earlier this week hitting its lowest mark since June, according to FactSet data.
What’s more, silver prices have slumped into a bear market if measuring the roughly 20% drop from their 52-week high of $20.666 an ounce, reached on Aug. 2, to levels hit this week. Silver prices, along with the iShares Silver Trust SLV, +0.71% exchange-traded fund, have lost roughly 10% since Donald Trump prevailed in the Nov. 8 U.S. presidential election.
Read: Silver prices have slumped into a bear market
The economic calendar was light but markets will be tracking the start to the holiday-spending season.
“Sometime over the weekend we should hear about how the Black Friday sales went. Last year sales were only up 5.5% year over year. That should be easy to beat this year, which may give the dollar a firm tone when trading begins on Monday,” said Marshall Gittler, head of investment research, with FX Primus.
With economic data pointing up, financial markets generally expect the central bank to raise rates during its next policy meeting in mid-December. They see a 93.5% chance the central bank will raise its benchmark short-term interest rate by a quarter-point to a range of 0.5% to 0.75%, according to a website that tracks investor expectations.
Technical analysts also weighed in on gold’s latest move.
“Gold has now reached our key bearish objective at $1,172, so from a purely technical point of view, we are less sure about gold’s next move,” said Fawad Razaqzada, market analyst with Forex.com.
“The pullback here could provide another opportunity for the so-called ‘smart money’ to reload their long positions, at a time when sentiment among the ‘street money’ is clearly bearish,” he said, targeting next resistance in the $1,190-$1,200 range, which was support and resistance in the past.
Razaqzada said for the long-term trend to turn decidedly bullish, he would need gold to hit a higher high above the most recent swing point at $1,337/8 area. “That is miles away from where we are at the moment. So any potential rallies in the interim should be treated with extra caution as they could very well be traps for bulls.”
Rounding out metals action on Comex, December copper HGZ6, +2.72% rose 6 cents, or 2.2%, to $2.668 a pound and logged a some 8% weekly gain, drawing increased demand in the wake of hopes for infrastructure spending.
See: Future for gold, oil and industrial commodities under President-elect Trump
January platinum PLF7, -2.47% fell $22.80, or 2.5%, to $908.30 an ounce. December palladium PAZ6, +1.02% shed $3.50, or 0.5%, to $740.90 an ounce. It’s been among the standout metals, driven higher on industrial demand bets. Palladium sees heavy industrial use as a key component in auto exhaust filters for gasoline-powered U.S. and Chinese cars.
Among exchange-traded funds, the SPDR Gold Trust GLD, -0.57% declined 0.6% by Friday afternoon and looked to shed about 2% for the week. The iShares Silver Trust SLV, +0.71% was up 0.1% but faced a 0.6% weekly drop. The VanEck Vectors Gold Miners ETF GDX, +0.54% added 0.6% and headed for a more than 2% weekly retreat.
