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Gold Slides Below $1,900 to Finish Week on Doubts Over Stimulus Package

October 23, 2020 at 16:27 by Andrew Moran

Gold futures slipped below $1,900 to finish the trading week, potentially giving the yellow metal a weekly loss. Gold prices have seesawed around the $1,900 mark for weeks, driven primarily by on-again, off-again coronavirus stimulus and relief negotiations. In the background, investors are trading the precious metal based on the resurgence in coronavirus cases, the US dollar, and uncertainty surrounding the 2020 presidential election.

December gold futures tumbled $5.00, or 0.26%, to $1,899.60 per ounce at 16:11 GMT on Friday on the COMEX division of the New York Mercantile Exchange. Gold is on track for a tepid weekly loss of 0.2%, paring its year-to-date rally to below 25%. This is the second straight week gold has slumped.

Silver, the sister commodity to gold, is ending the week below $25. December silver futures dropped $0.064, or 0.26%, to $24.645 an ounce. The white metal has advanced 1.5% on the week, adding to its 2020 surge of 38%.

Although gold prices had topped $1,917 in intraday trading, they wiped out their gains on doubts regarding another coronavirus-related stimulus and relief package. House Speaker Nancy Pelosi was confident on Thursday that a deal with Treasury Secretary Steven Mnuchin was “almost there.” However, Senate Republicans appear apprehensive about supporting a $2 trillion spending plan as they are calling for a $1.8 trillion package. Plus, Senate Majority Leader Mitch McConnell has refrained from committing to a pre-election vote on an aid package. Also, White House Economist Larry Kudlow has indicated that fiscal stimulus discussions were at a standstill on Friday.

The latest fiscal developments sent the leading stock benchmark indexes lower, led by the Dow Jones Industrial Average’s 100-point slide. The bond market was higher on Friday, with some long-dated bond yields at a four-month high. The benchmark 10-year Treasury bond yield reached 0.85%, up from 0.744% a week ago.

A weaker greenback supported gold and silver prices. The US Dollar Index, which gauges the greenback against a basket of currencies, tumbled 0.09% to 92.87, from an opening of 92.93. A lower buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase. The index is poised for a weekly decline of 0.9%, raising its YTD fall to 3.7%.

In industry data, the central banks were net sellers of gold in the third quarter for the first time in a decade, and China and Russia were absent in their usual purchases. Overall, physical demand decreased by 30% year-over-year to 562 metric tons in the July-to-September period.

Cameron Alexander, director of precious metals research at Refinitiv, remained optimistic about gold’s outlook in a recent research note:

The underlying macroeconomic conditions such as economic headwinds, the low interest rate environment, ongoing tension between the United States and China, rising inflationary expectations and the looming second wave of COVID-19, remain highly favourable for gold in the medium-to-long term.

In other metal markets, December copper futures dipped $0.019, or 0.6%, to $3.1345 a pound. December platinum futures added $30.00, or 3.39%, to $914.00 per ounce. November palladium futures shed $6.60, or 0.28%, to $2,389.30.

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