Gold prices settled higher Friday, chipping away some of their weekly loss, as comments from President Donald Trump on U.S. interest rates and the dollar, weighed heavily on greenback.
Trump voiced his displeasure with Federal Reserve interest-rate increases in a Thursday interview, prompting a decline in the benchmark dollar index, which gained momentum after he tweeted on Friday, accusing China and the European Union of manipulating their currencies and interest rates:
August gold GCQ8, +0.49% rose $7.10, or 0.6%, to settle at $1,231.10 an ounce. The contract settled at $1,224 Thursday—the lowest finish for a most-active contract since July 2017. Thursday’s settlement also marked bullion’s entry into correction territory—down more than 10% from its peak on Jan. 15 at $1,362.90. The futures contract saw roughly 0.8% decline this week, according to FactSet data.
The SPDR Gold Shares exchange-traded fund GLD, +0.55% was up 0.7%, but set for a weekly loss of 0.8%.
“Gold futures did get near-term overextended to the downside this week and President Trump’s comments that stalled the dollar rally are offering some relief to gold…and a retracement back towards the mid $1,200’s is becoming more likely,” said Tyler Richey, co-editor of the Sevens Report.
Trump’s latest tweet come amid a smoldering trade spat that has intermittently rattled financial markets.
The ICE U.S. Dollar index DXY, -0.76% fell by 0.7%, set for a loss of nearly 0.3% for the week. The dollar index, which measures half-dozen rival currencies, typically moves opposite dollar-denominated gold. Overall, the dollar has enjoyed a 2018 rebound as investors have turned to the U.S. as a source of safety during escalating trade spats.
“Now, you would argue that the Fed is independent and President Trump’s musings would have no impact on Fed policy and this is merely a reaction to an oversold condition and the comments spooked the [gold] shorts,” said Peter Hug, global trading director with Kitco Metals. “But it may be the beginning of a bigger policy, whereby the U.S. wants to drive the dollar lower to make U.S. goods less expensive and offset some of the damage caused by reciprocal tariffs being proposed by our trading partners.”
“The lesson of yesterday was how closely the gold market is marching to the tune of the dollar and how vulnerable the dollar is to any suggestion that the Fed may back off. Volatility will remain with us until the elections in November,” Hug said.
Still, analysts with a longer-term view argue that factors like immediate interest-rate policy and even the risk of trade war don’t undermine the function of gold as an asset. Trump said he was prepared to impose tariffs on all Chinese goods imported into the U.S.
“We do expect some renewed demand for gold as a haven, or as an inflation hedge, to boost the price to $1,300 per ounce by end-2018,” said the Capital Economics commodities research team, in a note.
”The medium-term outlook for gold is more positive in our view, as we expect the Fed to stop raising rates in 2019. The U.S. economy is also likely to slow next year which, coupled with lower yields and a weaker dollar, would probably give a lift to the price of gold,” they said.
In other trading, September silver SIU8, +0.77% gained 14.7 cents, or nearly 1%, to $15.549 an ounce. The contract fell over 1% Thursday to settle at $15.402 an ounce —its lowest close since late 2016. It saw a 1.7% weekly loss. The iShares Silver Trust SLV, +1.11% was down 1.9% for the week.
September copper HGU8, +2.13% settled up 6.1 cents, or 2.2%, at $2.756 a pound after settling at nearly $2.696 a pound Thursday, its lowest finish in about a year. The contract fell 0.7% from a week ago.
October platinum PLV8, +2.74% climbed by 2.9% to $829.50 an ounce, ending down 0.1% for the week. September palladium PAU8, +2.17% gained 2.6% to $888.90 an ounce, but after Thursday’s 4%, it tallied a decline of 4.7% for the week.