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Gold futures edged lower Friday at midday, after posting the biggest one-day gain in about a month as investors turned to Treasurys and the U.S. dollar for safety to end a turbulent week on Wall Street.
Gold for June delivery
GC00,
GCM22,
was down $2.70, or 0.2%, at $1,838.60 an ounce on Comex, after flipping between small gains and losses. It jumped1.4% Thursday for the best daily percentage rise for the most-active contract since April 12. The yellow metal also was on track for a rise of 1.7% on the week, which would break a string of four consecutive weekly declines.
July silver
SIN22,
was down 21 cents, or 1%, at $21.70 an ounce.
Treasurys have rallied this week, pulling back yields, as a sharp selloff for equities that has left the S&P 500 index
SPX,
on the brink of a bear market stirred demand for safe-haven assets. The yield on the 10-year note hit a 3 1/2-year intraday high above 3.2% early last week, but has pulled back to around 2.81%.
Retreating bond yields can give gold some breathing room. Rising yields raise the opportunity cost of holding nonyielding assets, but skeptics questioned whether the respite would last.
“Well, the falling yields have been the major trigger of the gold rebound yesterday, therefore the positive momentum could remain short lived, as the medium-term trend for the U.S. yields remains comfortably positive on the back of prospects of higher interest rates in the U.S.,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note. “The Federal Reserve (Fed) declared war against inflation, and it will raise the interest rates. The higher rates will have a straight positive impact on the yields.”
While investors fled equities in a brutal week for stocks that has the S&P 500 index
SPX,
on the brink of correction territory, a sizable $1.4 billion was also pulled from gold funds in the past week, according to BofA Global Research.
The SPDR Gold ETF
GLD,
shed $1 billion in funds for the week, according to Refinitiv Lipper data.
Gold “carries a liquidity premium and in a ‘sell everything’ environment, some investors often sell what they can to meet redemptions or margin calls,” a weekly World Gold Council report said, while pointing to the sector’s sharp ETF outflows.
“With a growing appetite and need for yield, investors who are moving down the liquidity curve to long-term ‘hard-to-liquidate’ assets are finding that having some gold on hand is even more important.”
The ICE U.S. Dollar Index
DXY,
a measure of the currency against a basket of six major rivals, was headed for a 1.5% retreat this week after trading at a 20-year high earlier this month. A stronger dollar can also be a headwind for commodities priced in the unit, making them more expensive to users of other currencies.
Gold is at a crossroads on the charts, Ozkardeskaya said, testing resistance at the 200-day moving average near $1,837 an ounce, a level that also “coincides with the negative correction band top, building since mid-April.”
If gold moves convincingly above the 200-day moving average, “we could see the rally persist toward the $1880-$1900 range. And the Russian shock on gold supply could support that move,” she said. “I still maintain my bearish outlook for gold in the medium to long run based on the expectation of higher yields, as the Fed won’t get rid of inflation fast enough. ”
In other metals trade, July copper
HGN22,
was flat at $4.26 a pound.
July platinum
PLN22,
fell 1.3% to trade at $939.60 an ounce, while June palladium
PAM22,
slumped 2.9% to $1,921 an ounce.
