Gold finished a withering week with a slight gain on Friday, as a pickup in a benchmark Treasury yield to its highest level since 2011 and a resurgence in the U.S. dollar moderated somewhat. Those factors throughout the week combined to decisively knock the commodity in to a downtrend and its worst weekly decline in five months.
June gold GCM8, +0.25% rose $1.90, or nearly 0.2%, to settle at $1,291.30 an ounce. The contract’s Thursday settlement at $1,289.40 marked a nadir for a most-active contract since late December, according to FactSet data. Prices, which climbed modestly last week after three straight weekly falls, finished down 2.2% from last Friday’s finish, the worst weekly tumble for the commodity since the period ended Dec.8, 2017, when gold fell 2.6% for the week.
A strengthening dollar and rising rates can dull investment demand for bullion, which offers no yield.
“With the dollar heavily supported by positive economic data and [interest] rate hike expectations, zero-yielding gold is likely to remain vulnerable to heavy losses,” said Lukman Otunuga, research analyst at FXTM.
“While geopolitical tensions and uncertainty could offer some support, price action shows that bears remain firmly in control,” he said in a daily note. “Taking a look at the technical picture, previous support at $1,300 could transform into a dynamic resistance that encourages a decline towards $1,280.”
Gold “has marked its lowest level for the year and the possibilities are we may stay below $1,300 for some time unless there is a major risk event,” said Naeem Aslam, analyst with Think Markets.
The yield on the 10-year Treasury TMUBMUSD10Y, -1.54% held at a 7-year peak on Friday, though it moderated somewhat from a peak around 3.125% earlier Friday to 3.064% in recent trade. Bond prices, which trade inversely to yields, rallied as geopolitical concerns stimulated appetite for so-called haven assets like U.S. government paper.
The U.S. dollar, as measured by the ICE U.S. Dollar Index DXY, +0.17% was up nearly 0.2% at 93.62, set for its best week since April. A strengthening greenback makes commodities priced in the currency, like gold, more expensive to buyers using other monetary units.
“The strength of the dollar index and the subdued reaction to the geopolitical tensions by investors are the reasons behind the move,” Aslam said. “Failure of the U.S. to reach any trade deal with China, as [President] Trump has already indicated that there may not be a favorable outcome, could stimulate some demand for gold. Investors would seek safe haven due to a full blown trade war.”
As for the latest on the trade front, a China official on Friday denied an offer had been made to cut its trade surplus with the U.S. by $200 billion. A variety of news outlets reported that an offer had been made on Thursday. That comes amid doubts over the success of those talks, given that U.S. President Donald Trump said Thursday that Beijing had become too “spoiled” and he had lowered his expectations for negotiations.
Among other metals, July silver SIN8, -0.13% fell almost 0.2% to $16.455 an ounce, for a roughly 1.8% weekly decline. Copper for July delivery HGN8, -0.83% fell 0.8% to $3.064 a pound, ending down 1.5% for the week. July platinum PLN8, -0.67% lost 0.6% to $886.50 an ounce, for a weekly drop of 4.3%, while June palladium PAM8, -1.65% fell 1.8% to $960.20 an ounce, settling down 2.5% on the week.
In exchange-traded fund action, the SPDR Gold Shares GLD, +0.16% iShares Silver Trust SLV, +0.06% and VanEck Vectors Gold Miners GDX, +0.05% each inched up by roughly 0.1% in Friday dealings. All three ETFs, however, were trading lower for the week.