Gold down 1.2% on week as dollar hits 6-month highs

Investing.com - The prospect of gold breaking out solely on a Fed pause in rates was challenged again this week as the yellow metal posted a weekly loss as its nemesis, the dollar, shot up instead.

In Friday’s trade, gold futures’ most-active December contract settled at $1,942.70 an ounce on New York’s Comex, up 20 cents on the day. Yet, losses in three prior sessions after Monday’s U.S. Labor Day holiday meant a negative week for Comex gold, which finished the five-day period down by a net 1.2%, practically giving back the previous week’s 1.3% gain.

The spot price of gold, which is more closely followed than futures by some traders, was at $1,920.02 an ounce by 14:27 ET (19:45 GMT), up 30 cents, or 0.02%. For the week, the spot price, which is reflective of real-time trades in bullion, was down almost 1% versus the prior week’s 1.3% gain.

The prior week’s gain came on the back of the U.S.non-farm payrolls report for August, which saw unemployment tick up to 3.8% from July’s 3.5% despite a gain of 187,000 jobs versus the forecast 170,000. The higher jobless rate reinforced the notion that the Fed will hold rates unchanged when it meets on Sept. 20 to review U.S. monetary policy, sending gold momentarily higher last week.

But as this week began, speculation resurfaced of the Fed exercising another rate hike or more before the end of the year, in its bid to bring inflation to its annual target of 2%.

Inflation, measured by the Consumer Price Index, or CPI, fell from a four-decade high of more than 9% per annum in June 2022 to as low as 3% in June this year. But as of July, it began to perk again, reaching 3.2%. That raised the possibility of the Fed, which has already added 5% to interest rates over the past 18 months, turning aggressive again on monetary policy. Concerns over that sent the Dollar Index to six-month highs this week.

Since the latest non-farm payrolls surfaced a week ago, the spot price of gold has moved just about $15 an ounce, going from a settlement of just below $1,940 on Sept. 1 to trade in a range of between $1,920 and $1,925 in the latest session.

Gold chartist Sunil Kumar Dixit said the same $15 play is what the spot price needs to crack in order for a new price direction to emerge.

Paramount to the bears in gold now is a push of the spot price beneath the key $1,1915 support, said Dixit.

For the longs, it’s a clear break above the $1,930 resistance, he said.

“Gold has had another interesting week, with last Friday’s jobs report feeling like a distant memory,” said Ed Moya, analyst at online trading platform OANDA. “It didn’t give it anything like the boost that it appeared it would on the basis of the numbers themselves, almost all of which looked very favorable.”

Moya noted that gold’s slide this week also came on the back of U.S. economic data suggesting that a soft landing, rather than a hard recession, could be the scenario for the world’s largest economy by the end of the year.

“Perhaps the yellow metal has found steady ground in the $1,900-$1,950 region as we await next week’s inflation data and the Fed meeting the following week,” he said, referring to the upcoming August update of the CPI and the rate decision of the central bank.

(Ambar Warrick contributed to this item)