Gold heads for first weekly loss since June after wild ride

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Gold headed for the first weekly drop in more than two months after being buffeted by climbing real yields, profit-taking and a stalemate in US stimulus negotiations.

Bullion is ending a week filled with wild swings on a relatively tame note, and more than $100 an ounce below last week’s record. This comes as Treasury yields steadied near an eight-week high, with the number of Americans applying for unemployment benefits falling below 1 million for the first time since the coronavirus pandemic began in March.

Data Friday showed China’s economic recovery continued in July, though retail sales were weak.

Despite this week’s decline, gold is still up almost 30% this year, as real yields turned negative amid stimulus measures to support the economy. Goldman Sachs Group Inc.’s global head of commodities research Jeffrey Currie said the precious metal is the best hedge against currency debasement, with most of the rally due to the decline in real rates.

“Barring further profit-taking, we think the longer-term uptrend is intact given US dollar weakness and the scale of stimulus and as we expect interest rates to remain low or negative,” Suki Cooper, precious metals analyst at Standard Chartered Bank, said in a note. “Price dips are likely to be viewed as buying opportunities as the macro backdrop remains favorable for gold.”

Spot gold fell 0.3% to $1,948.40 an ounce by 9:57 a.m. in London, set for a 4.3% weekly loss. Prices rose the previous two days after Tuesday’s 5.7% slump, the biggest one-day loss in seven years. Futures for December delivery retreated 0.7% to $1 957.20 in New York.

Silver for immediate delivery declined 3% to $26.6695 an ounce, after a 7.8% jump on Thursday. The Bloomberg Dollar Spot Index headed for a weekly loss, while European stocks sank on Friday.

On the virus front, there’s been little progress in political negotiations on a new round of pandemic relief, with House Speaker Nancy Pelosi saying she rebuffed an “overture” from Treasury Secretary Steven Mnuchin to restart talks. The outbreak is likely to be a challenge for years to come even with a vaccine, according to pharmaceutical and public-health experts.

“All the conditions for a favorable gold price environment are present,” Jake Klein, executive chairman of Australian producer Evolution Mining, said in a Bloomberg TV interview on Friday. “The geopolitical tensions, the Covid pandemic and the impact that’s having - unemployment rates are rising -- these are all unfortunate circumstances. Unfortunately, gold is a beneficiary of those times. So I think it has found a new floor.”

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