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Gold Slips on Market Bounce, Poised for Weekly Gain

June 12, 2020 at 18:52 by Andrew Moran

Gold futures are recording small losses to finish the trading week, but they are still on track for a modest weekly gain. The precious metal was slightly affected by the broader market rally, an improvement in consumer sentiment, and a rallying US dollar. With the recent volatility sweeping through financial markets, where are gold prices headed in the second half of 2020?

August gold futures dipped $2.20, or 0.13%, to $1,737.60 per ounce at 17:31 GMT on Friday on the Comex division of the New York Mercantile Exchange. Gold prices are on track for a 1% increase for the week, adding to their year-to-date gains of about 14.3%.

Silver, the sister commodity to gold, is also trading lower to close out the trading week. July silver futures tumbled $0.369, or 2.06%, to $17.52 per ounce. The white metal is poised for a 2.6% weekly loss, contributing to its YTD decline of more than 2%. Silver prices have been on a tear over the last six weeks, soaring roughly 10%.

The University of Michigan’s preliminary readings for June suggest rising optimism among consumers in the key calculations. Consumer expectations rose to 73.1, consumer sentiment jumped to 78.9, and current economic conditions advanced to 87.8. Inflation expectations dipped to 3%, while five-year inflation expectations also dipped to 2.6%.

Import prices rose 1%, the biggest increase since February. Export prices edged up 0.5%, up from a 3.3% plunge in April.

Precious metals were affected by the end-of-week rally in US equities. Following Thursday’s market rout, stocks picked up momentum as investors took advantage of the dip. That said, the leading indexes pared their massive gains and were up modestly closer to the end of the trading session.

The volatility spurred investor interest in the greenback. The US Dollar Index skyrocketed 0.65% to 97.36, from an opening of 96.81. The index, which measures the buck against a basket of currencies, will squeak out a tepid 0.45% weekly gain. A stronger greenback is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.

After Wednesday’s Federal Open Market Committee (FOMC) policy meeting, the Federal Reserve’s decision to leave interest rates near zero and unchanged for the next two years elevated gold. This should support the bullish case for the safe-haven asset, especially as the Fed has shown zero sign that it would taper its aggressive and unprecedented unlimited quantitative easing program.

But analysts agree that gold needs one other catalyst to help it break above $1,800 or $1,900 this year. And that may be a second coronavirus wave, which was one of the chief causes of the massive selloff on Thursday. The number of confirmed COVID-19 cases has risen in nearly two-dozen American states as more economies begin reopening.

In other commodity markets, July copper futures picked up $0.0115, or 0.44%, to $2.601 a pound. July platinum futures fell $5.90, or 0.72%, to $818.10 per ounce. July palladium futures tacked on $15.20, or 0.8%, to $1,925.30 per ounce.

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