Gold prices recovered Friday to try for their fourth gain in the last five sessions, a performance that looks to hand the yellow metal a modest weekly gain even as riskier assets including stocks remain in favor.
Gold for August delivery GCQ7, +0.27% rose $4.10, or 0.3%, to $1,221.40 an ounce. The contract is on track to log a roughly 0.7% weekly gain. The metal hit a four-month low as recently as last week.
A modest slip in the ICE U.S. Dollar Index DXY, -0.12% helped boost dollar-denominated prices for the yellow metal. But gains in haven investments were held in check as stocks were hovering near records while bank earnings flowed.
Fawad Razaqzada, market analyst at Forex.com, explains the cross-market tug-of-war that is impacting gold.
“Gold has been undermined by rising government bond yields owing to major central banks generally turning more hawkish, while the still-buoyant equity markets means there has been reduced demand for the perceived safe haven asset,” he said in a commentary.
“Thus, for the time being, the impact of the weaker U.S. dollar is not having any meaningful impact on the buck-denominated precious metal,” he added. “Apparently, investors continue to find value in equities even at these elevated levels and are overlooking gold, an asset which pays no interest or dividend and costs money to store.”
Gold pulled back Thursday after a three-session climb, with the dollar gaining ground against most currency rivals and U.S. equities trading mostly higher after in testimony to Congress this week Federal Reserve Chairwoman Janet Yellen indicated that the federal-funds rate wouldn’t need to rise significantly to “get a neutral policy stance.”
Fed officials have said they plan on lifting rates at least once more in 2017 and will begin to unwind the $4.5 trillion balance sheet, which could act as an additional tightening measure.
Gold prices have been posting gains since a solid U.S. jobs report issued late last week, which backed the argument for higher interest rates, although likely not at a more aggressive pace than the go-slow approach the Fed has signaled. Still, the prospect for gold-negative interest-rate hikes had sent the yellow metal to their lowest level in about four months as that job data hit.
Rising real interest rates lower the attractiveness of holding gold because the metal provides no yield, and entices investors to rotate into riskier assets like stocks. Higher rates may also boost the value of the dollar which usually moves in the opposite direction of the gold price.
In other trading, silver for September SIU7, +0.25% rose 7 cents, or 0.4%, to $15.765 an ounce. The contract is headed toward a 1.8% weekly gain.
Looking with a wider lens, Taki Tsaklanos, lead analyst at Investing Haven, said in late April that silver prices likely peaked for the year at $18.514 an ounce on April 17—and so far, they have. But that’s enticing at least one observer to consider buying.
“We are bearish for 2017,” he recently told MarketWatch’s Myra P. Saefong in an interview.
“But essentially, we see a once-in-a-decade opportunity in the gold and silver market,” Tsaklanos said. “2016 was great in the first months but we believe that, after the ongoing selloff in precious metals, 2017 will be setting up for a long-term bottom and, hence, a great buying opportunity.”
Meanwhile, October platinum PLV7, +0.54% rose $4, or 0.4%, to $911.10 an ounce, while palladium for September PAU7, +0.80% rose $8.80, or 1%, to $863.55 an ounce. September copper HGU7, +0.30% rose 1 cent, or 0.4%, to $2.6715 a pound.