Bullion pared losses on Friday after a softer-than-expected US inflation report boosted bets on further monetary easing by the US Federal Reserve. Bond yields fell slowly as traders assess a high probability of two rate cuts before the year is out. Lower rates generally benefit precious metals because they do not pay interest.
Investors continued to weigh the prospects for better US-China relations. US President Donald Trump and his counterpart, Xi Jinping, are expected to meet next week in a bid to de-escalate a simmering trade war. A deal would ease some of the geopolitical tensions that have increased demand for safe haven assets, including gold.
A torrid run that started in mid-August and pushed prices to a record high of $4,381.52 an ounce on Monday came to an abrupt halt the next day, with investors taking profits. The slump coincided with large outflows from gold-backed exchange-traded funds, which on Wednesday recorded the biggest single-day drop in tonnage in five months, according to data compiled by Bloomberg.
“The correction appears to be stabilizing, but broader retail participation means volatility is likely to remain high,” said Charu Chanana, Pte strategist at Saxo Capital Markets. “The next key resistance is around $4,148, but a clear break above $4,236 may be needed to confirm upside momentum is back.”
Gold is up 57% this year, with central bank purchases and so-called debasement trading (where investors avoid government debt and currencies to protect themselves from runaway budget deficits) providing support.
Platinum, meanwhile, rose as much as 2% before erasing gains. The London market for the metal is showing signs of significant tightness, with prices rising to a premium of more than $70 an ounce to New York futures on Wednesday. Leasing rates have also soared, with the moves mirroring the momentum seen in silver after a liquidity crunch earlier this month.
Spot gold fell 0.3% to close at $4,113.05 an ounce at 5 p.m. in New York, bringing its weekly loss to 3.3%. Silver, which hit a record above $54 an ounce last week, fell, translating into a weekly loss of more than 6%. The Bloomberg Dollar Spot Index was little changed, while platinum and palladium both fell.
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