December gold GCZ6, +0.45% fell $1.10, or 0.1%, for the session to settle at $1,251.90 an ounce after tapping a high of $1,267.60. Prices held ground at their lowest level since early June.
Prices lost about 5% for the week, according to FactSet data. That was the largest one-week decline since mid-September 2013.
Thursday’s finish pushed prices below their 200-day moving average, a move which could signal further declines.
Gold had initially extended an earlier advance after government data showed the U.S. economy created 156,000 new jobs in September. That showed another solid gain in employment, but the figure came in below the 172,000 job gain expected by economists polled by MarketWatch.
But prices for the metal took a sharp turn lower in late morning trading, as some analysts and traders decided that the figures don’t rule out a rate hike before year’s end. The ICE U.S. Dollar Index DXY, -0.22% seesawed between losses and gains Friday, but was trading about 1.3% higher for the week.
“The semi-rally in gold fizzled out as investors dug into the payrolls report more deeply, seeing that it wasn’t as negative as initially thought,” Brien Lundin, editor of Gold Newsletter, told MarketWatch.
Once gold “breached the 200-day moving average on a spot basis at around $1,256, technically-based traders found it safe to turn negative now that the payrolls report was behind us,” he said. “Thus, gold was hit by a big sell order—either long liquidation, short-sales or some combination—that quickly took it lower.”
Bottom line, he said it “seems the Fed will get its annual quarter-point rate increase done in December, and gold will have to face that headwind for the next couple of months.”
But not everyone expects a rate increase before the end of the year.
Peter Grant, chief market analyst with gold broker USAGOLD, said it “seems likely that we’ll end this year with sub-2% GDP” and that will actually make it “pretty hard for the Fed to justify a rate increase.”
Rising interest rates can be negative for gold, which doesn’t bear a yield, and a higher-rate trajectory tends to lift the dollar, leaving the gold priced in greenbacks less attractive to buyers using other currencies.
Overall, the reaction in gold prices to the possibility of a U.S. interest-rate hike at the end of the year has been “larger than we anticipated,” said Goldman analysts Max Layton, Mikhail Sprogis and Jeffrey Currie, in a note released Friday.
That leaves risks surrounding their year-end outlook of $1,280 an ounce for spot gold as “moderately skewed to the downside,” said the analysts.
As for this week’s losses for gold, Grant said there may well have been a broad “scramble for liquidity in London this week as a result of sharp losses in sterling and gilts.” Comments from Britain’s prime minister earlier this week indicated that she’s pushing for a clean break fro the European Union, prompting a drop in the British pound.
Gold’s more volatile sister metal, silver, saw much larger losses this week. December silver SIZ6, +1.33% fell 3.5 cents, or 0.2%, to $17.38 an ounce Friday, ending about 9.6% lower for the week.
December copper HGZ6, +0.53% was up less than a cent at $2.164 a pound, finishing about 2.1% lower on the week. January platinum PLF7, +0.65% fell $3.70, or 0.4%, to $962.60 an ounce, to lose 7% for the week, while December palladium PAZ6, +0.53% added $1.25, or 0.2%, to $667.40 an ounce, but still lost 7.5% for the week.
The main gold ETF, the SPDR Gold Trust GLD, +0.07% slipped by 0.2% as of gold’s settlement—down about 4.9% week to date. For the day’s session, The VanEck Vectors Gold Miners ETF GDX, +0.70% and the iShares Silver Trust SLV, +0.97% were each trading 0.8%.
/Market Watch/
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