Gold futures fell sharply on Friday, looking to log their first finish below $1,900 an ounce this year as yields for U.S. government bonds extended a weekly climb, eroding some appetite for bullion which competes against haven sovereign debt for buyers.
A weaker-than-expected December U.S. jobs report failed to provide much of lift for metals on the session even though analysts expect more fiscal stimulus from the incoming Biden administration.
“It is surprising to see such a massive downside move for the gold price when the U.S. job numbers have clearly indicated that we are not out of the woods,” Naeem Aslam, chief market analyst at AvaTrade, told MarketWatch.
“However, traders believe that negative news is good news because it means more help from the [Federal Reserve] and from fiscal policy, which is supporting the risk-on trade,” he said. U.S. benchmark stock indexes traded mostly higher in Friday dealings.
A closely watched employment reading showed that the U.S. lost jobs in December for the first time in eight months as the spread of coronavirus and variants of the COVID-19 forced fresh lockdowns in parts of the country.
Businesses and government shed 140,000 jobs last month, the Bureau of Labor Statistics said Friday. The official unemployment rate, meanwhile, was unchanged at 6.7%.
Aslam believes that prices of gold have been “way oversold and this means bargain hunters are going to step in soon.”
February gold
GCG21,
GC00,
fell by $61.70, and was down 3.2% at $1,851.90 an ounce midsession Friday. Most-active gold futures haven’t settled below $1,900 since Dec. 31, according to FactSet data.
The 10-year U.S. Treasury yield
TMUBMUSD10Y,
was nearing 1.1%, after ending 2020 at 0.926%, marking a powerful uptrend for the benchmark note in the first full week of 2021. Higher Treasury yields can spell weakness for gold, which like other commodities offers no yield and suffers more by comparison.
The session’s slump for gold prices followed a pair of political wins by Democratic candidates in Senate runoff races in Georgia earlier in the week that paved the way for further fiscal relief measures from President-elect Joe Biden after he takes office on Jan. 20.
“This may well just be a bit of a catch up move, with yields having risen all week following the Democrats victory in Georgia which gave them control of the Senate and completing the clean sweep,” wrote Craig Erlam, senior market analyst at Oanda, in a daily research note.
Silver for March delivery
SIH21,
SI00,
meanwhile, was trading $1.45, or 5.3%, lower at $$25.81 an ounce.
For the week, gold was on track for a weekly skid of 2.2%, while silver was set for a weekly slide of 2.4%, based on the most-active contracts.
Gold has likely formed a “short term top this week,” said Chintan Karnani, chief market analyst at Insignia Consultants. “There has to be some new gold positive news for prices to restart its bullish trend or the U.S. dollar Index
DXY,
has to sell off further.”
Market participants said that the lack of upside reaction from gold may also be due to expectations that the jobs report would be softer and a bullish economic outlook that could hurt gold prices in the near term.
“Today’s big miss on the jobs consensus forecast did not significantly move markets. Reason: Traders and investors are so keenly focused on the bullish aspects of the likely end of the raging pandemic this year and the ensuing expected booms in world economies,” wrote Jim Wyckoff, senior analyst at Kitco.com.
Other metals traded on Comex also declined. March copper
HGH21,
shed 1% to $3.658 a pound. Prices were still trading around 4% higher for hte week, after settling Thursday at the highest since 2013.
April platinum
PLJ21,
fell 3.6% to $1,083.20 an ounce, looking at a slight gain for the week, and March palladium
PAH21,
traded at $2,352.50 an ounce, down 3.3%, but trading more than 4% lower on the week.