Last Friday marked the peak of gold’s highest weekly climb since February. The ascent in gains was kicked off by the weakening position of the U.S. dollar and Wednesday’s Federal Reserve decision. The highest finish recorded since early March features April gold GCJ7, +0.16% which rose $3.10, or 0.3%, finally settling at $1,230.20 an ounce. According to FactSet data, with a 2.4% gain, it was the strongest marked
since the week ended Feb. 3.
Another leading precious metal – silver also shines. Its best weekly gain since early January was marked by the May delivery SIK7, +0.07% that added 8.3 cents, or 0.5%, to $17.413 an ounce, resulting to a weekly gain of 2.9.
The decline of the buck, and inflation, has historically made assets priced in the currency like gold more appealing to investors. From -0.06% closing at 1.1% lower, the ICE U.S. Dollar Index DXY showed a decline in the dollar’s strength. Christian Magoon, Amplify Investments’ Chief Executive Officer, told MarketWatch – “I am bullish on gold prices as I believe the U.S. dollar will continue to weaken”.
Recently, we’ve witnessed a lag in gains for U.S. equities. The lifting of the benchmark interest rates by a quarter-point was a widely anticipated move from the Fed. The less aggressive forecasts and statements of the Central Bank on future rate increases has taken its toll, putting considerable amount of pressure on the U.S. dollar. Magoon added that the so-called “Trump bump” to the investing scene and we got financial markets that “will continue to fade as the realities of the legislative process will slow or stop many Trump initiatives.” That “will also be bullish for gold.”
Senior Economic Adviser for Rosland Capital – Jeffrey Nichols said that rise of gold was partly driven by the tapering record-setting pace of the S&P 500 index SPX, +0.01% and the Dow Jones Industrial Average DJIA, +0.15%. According to Nichols, the “momentum players will shift from equities to gold where there is momentum that is now strengthening.”
On another note, some market strategists predict headwinds for gold and other precious metals. This is associated with the bullish sentiment driven by Trump’s pro-business agenda which involves beefing up the U.S. economy through fiscal-stimulus measures. And though there are doubts about Trump’s ability to implement this, its enactment could force the Fed to get the rate increase ball rolling – a crisis for gold.
Analyst at FXTM – Lukman Otunuga, noted in a Friday research “although bulls have exploited dollar’s weakness to elevate gold, gains could be limited in the longer term if the Fed readopts an aggressive stance.”
Other metal players on Comex include May copper HGK7, -0.45% rose 0.5% to $2.692 a pound, ending with a 3.7% increase on the week. April platinum PLJ7, +0.38% added 0.5% to $963 an ounce, gaining
2.6%; while June palladium PAM7, +0.15% climbed 1.2% to $775.80 an ounce – advancing at 4.1% for the week.