Gold futures dropped by more than 4% on Friday to log their biggest one-day loss since early November, as yields for U.S. government bonds extended a weekly climb, eroding some appetite for bullion which competes against haven sovereign debt for buyers.
Strength in the U.S. dollar also pressured dollar-denominated prices for gold.
“The bearish fundamental of very little risk aversion in the marketplace at present is “working against the safe-haven metals,” said Jim Wyckoff, senior analyst at Kitco.com, in a market update Friday. Benchmark U.S. stock indexes carved out fresh records Friday before pulling back. They are set to end the week higher.
A higher U.S. dollar index DXY, +0.31% is also negative for the metals, Wyckoff said. Meanwhile, bitcoin, which hit a new record high, may be “stealing some of the trader/investor buying interest that would have in the past been directed to the safe-haven metals,” said Wyckoff.
February gold GCG21, -3.57% GC00, -3.57% fell by $78.20, losing 4.1% to settle at $1,835.40 an ounce. That was the lowest settlement for most-active gold futures since Dec. 14, according to FactSet data. Prices also saw their worst one-day percentage loss since Nov. 9, according to Dow Jones Market Data.
Based on the Dec. 31 settlement, which was the last trading day of last week, gold has lost nearly 3.2%, while silver saw a weekly slide of 6.7%.
A weaker-than-expected December U.S. jobs report failed to provide much of lift for metals on the session even though analysts expect more fiscal stimulus from the incoming Biden administration.
“It is surprising to see such a massive downside move for the gold price when the U.S. job numbers have clearly indicated that we are not out of the woods,” Naeem Aslam, chief market analyst at AvaTrade, told MarketWatch.
“However, traders believe that negative news is good news because it means more help from the [Federal Reserve] and from fiscal policy, which is supporting the risk-on trade,” he said. U.S. benchmark stock indexes traded mostly higher in Friday dealings.
A closely watched employment reading showed that the U.S. lost jobs in December for the first time in eight months as the spread of coronavirus and variants of the COVID-19 forced fresh lockdowns in parts of the country.
Businesses and government shed 140,000 jobs last month, the Bureau of Labor Statistics said Friday. The official unemployment rate, meanwhile, was unchanged at 6.7%.
Aslam believes that prices of gold have been “way oversold and this means bargain hunters are going to step in soon.”
The 10-year U.S. Treasury yield TMUBMUSD10Y, 1.102% was nearing 1.1%, after ending 2020 at 0.926%, marking a powerful uptrend for the benchmark note in the first full week of 2021. Higher Treasury yields can spell weakness for gold, which like other commodities offers no yield and suffers more by comparison.
The session’s slump for gold prices followed political wins by Democratic candidates in two Senate runoff races in Georgia earlier in the week that paved the way for further fiscal relief measures from President-elect Joe Biden after he takes office on Jan. 20.
“This may well just be a bit of a catch up move, with yields having risen all week following the Democrats victory in Georgia which gave them control of the Senate and completing the clean sweep,” wrote Craig Erlam, senior market analyst at Oanda, in a daily research note.
Gold has likely formed a “short term top this week,” said Chintan Karnani, chief market analyst at Insignia Consultants. “There has to be some new gold positive news for prices to restart its bullish trend or the U.S. dollar Index DXY, +0.31% has to sell off further.”
Market participants said that the lack of upside reaction from gold may also be due to expectations that the jobs report would be even weaker and a bullish economic outlook that could hurt gold prices in the near term.
“Today’s big miss on the jobs consensus forecast did not significantly move markets. Reason: Traders and investors are so keenly focused on the bullish aspects of the likely end of the raging pandemic this year and the ensuing expected booms in world economies,” wrote Jim Wyckoff, senior analyst at Kitco.com.
Other metals traded on Comex also declined. March copper HGH21, -0.53% shed 0.6% to $3.6735 a pound. Prices were still 4.4% higher for the week, after settling Thursday at the highest since 2013.
April platinum PLJ21, -4.62% fell 4.7% to $1,071.30 an ounce, for loss of 0.7% for the week, and March palladium PAH21, -2.49% settled at $2,365 an ounce, down 2.7% for the session and 3.6% lower on the week.