Gold Pushes Lower, But Poised for August Win
Gold futures fell Friday in electronic trade as the likelihood for imminent military action against Syria ebbed, but the precious metal stayed firmly on track to post gains for the week and the month.
Gold for December delivery GCZ3 -1.03% was down $11.50, or 0.9%, to $1,400.90 an ounce, on pace for a third consecutive session of declines.
Gold futures on Thursday fell $5.90, or 0.4%, on the Comex division of the New York Mercantile Exchange after the U.S. government said a decision about launching an attack against Syria hadn’t been made. Such a move would follow an accusation by the U.S. that the Syrian government used chemical weapons against civilians near Damascus last week. Syria denied the accusation.
Late Wednesday, the U.K. Parliament in a preliminary vote rejected the use of force in Syria. A further vote was set for early next week, specifically on whether the U.K. should get directly involved. Meanwhile, the White House Thursday evening told congressional leaders a potential strike on Syria would focus on removing the regime’s chemical-weapons capability, The Wall Street Journal reported.
As concerns about Syria accelerated, gold futures this week pushed past $1,400 an ounce and marked a return to a bull market as prices increased at least 20% from intraday lows hit by Comex gold futures in late June.
For the week, gold was on track for a 1.1% advance, and was poised for a 7.4% climb for the month.
“Following a multi-month decline, gold has rallied over recent weeks in the wake of a softer U.S. dollar and rising risk aversion,” wrote Crédit Agricole head of global markets Mitul Kotecha in a report Friday.
Gold may benefit in the short term from seasonal demands stemming from the Hindu festival of Diwali in November and on Syrian tensions, said Kotecha, suggesting investors sell on a rally to the 200-day moving average around $1,500.
But investor concerns about a slowdown in monetary stimulus by the Federal Reserve have pressured gold this year, and prices remain down by 16%.
But medium-term risks for gold “remain on the downside” based on forecast models for oil prices, the 10-year Treasury yield 10_YEAR +0.29% and the ICE dollar index DXY -0.07% , said Crédit Agricole, noting gold has further to fall with U.S. government bond yields expected to move higher.
U.S. yields have recently risen on the prospect of Fed tapering, with Fed officials saying improvement in the economy warrants such action.
Albert Edwards, strategist at Societe Generale, who is known for being an extreme bear, said gold will soar to $10,000 per ounce, the U.S. S&P 500 index SPX +0.20% will sink to 450 and the yield on U.S. 10-year Treasury bonds 10_YEAR +0.29% will drop to below 1%. He’s made the $10,000 gold call at least three times previously, and said the sharp fall in emerging-market currencies will eventually lead to a global rout.
Later Friday, investors will get a look at manufacturing activity in the Chicago region in August, which is expected to show an increase.
Figures on U.S. consumer sentiment and consumer spending are also due. The spending report, the first look at such activity for the third quarter, is projected to show a 0.3% in July, down from 0.5% in the prior month.
In other trading action Friday, the most-active December silver contract SIZ3 -2.51% fell 47 cents, or 2%, to $23.62 an ounce and December copper HGZ3 -0.06% rose 1 cent, or 0.3%, to $3.27 a pound.
October platinum PLV3 -0.49% lost $6.20, or 0.4%, to $1,516.20 an ounce. December palladium PAZ3 -0.55% declined $1.35, or 0.2%, to $736.40 an ounce.
Source: Marketwatch
