25 Sep 2021
By Myra P. Saefong and Mark DeCambre, Market Watch:
Gold futures little changed for the week, but copper climbs
Gold futures settled higher on Friday, a day after posting their sharpest daily loss in a week, as investors continued to digest the Federal Reserve’s monetary policy plans, as well as China’s crackdown on cryptocurrencies and developments tied to property giant Evergrande.
Prices for the precious metal only finished a few cents higher than last Friday’s settlement.
China on Friday reiterated its crackdown on cryptocurrencies, with the People’s Bank of China stating that virtual currency doesn’t have the same legal status as legal currency.
The gold price will break past $1,840 resistance “if and when there is confirmation that China will eradicate cryptocurrencies,” Chintan Karnani, director of research at Insignia Consultants, told MarketWatch. There has to be more “clarity” on a potential crypto ban from China.
“History suggests that cryptocurrencies have risen sharply after any major price crash (irrespective of news), so it is wait and see for cryptocurrencies,” said Karnani.
Gold also found support after China property giant Evergrande’s woes extended beyond China, with U.S. Evergrande investors reportedly not yet having received interest payments, said Edward Moya, senior market analyst at Oanda.
“It looks like China won’t save Evergrande but will try to contain any systemic risks, which should lead to some safe-haven flows for bullion,” he said in a market update.
December gold rose $1.90, or 0.1%, to settle at $1,751.70 an ounce on the session. The 1.6% drop on Thursday represented the sharpest one-day dollar and percentage decline for bullion since Sept. 16. For the week, gold futures ended 30 cents higher than last Friday’s $1,751.40 settlement, FactSet data show.
The bias for gold is still to downside, as the Federal Reserve’s statement on monetary policy and Fed Chair Jerome Powell’s comments from Wednesday are “digested by market,” Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch. The Fed taper of bond purchases “will commence by year-end and [interest] rates will begin to tighten most likely in 2022.”
The Fed on Wednesday signaled its intent to “soon” taper its bond purchases and raise interest rates by late next year, which could dim appetite for bullion if investors shift to assets that offer yields. The central bank’s projections of interest-rate increases also pointed to rate increases as early as 2022, which could also dent demand for precious metals.
Wright also saw “risk-off” sentiment in the U.S. equity markets Friday, due to Evergrande’s interest payment miss and the possible impact on the Chinese and U.S. economies, as supportive for gold.
“The indirect exposure is a risk currently being factored in,” Wright said. So, “there is a small appetite for safe-haven gold….but I believe it is short-lived.”
Looking ahead, analysts said that absent a near-term catalyst, gold may be more influenced by U.S. dollar moves and risk appetite.
“Moving forward, investors should understand that, unless anything noteworthy happens to the dollar index, gold prices will likely be influenced more by investors’ risk appetite,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a daily note.
The dollar was up 0.1% on the week and down 0.2% on Friday, as measured by the ICE U.S. Dollar Index, a measure of the buck against a half-dozen currencies.
Meanwhile, silver for December delivery lost 25 cents, or 1.1%, to $22.425 an ounce, following a 1% decline on Thursday. For the week, silver was up 0.4%.
Strength in U.S. Treasury yields kept gains for gold in check, with the 10-year Treasury note touching a high of 1.46% in Friday dealings. Rising rates can undercut demand for precious metals which don’t offer a coupon.
Among other metals traded on Comex, December copper edged up by 1.3% to $4.286 a pound, ending 0.9% higher for the week.
October platinum fell 1.7% to $979.90 an ounce, but notching a weekly rise of over 5%. December palladium declined by nearly 1.1% to $1,951.10 an ounce, contributing to a roughly 1.6% loss for the week.
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