Gold tumbles second straight quarter, worst week since 2021

Investing.com - Gold prices fell for a second quarter in a row after losses that began in August and held through September, underscored by the current week’s drop — the worst in more than two years.

Gold’s most-active futures contract on New York’s Comex, December, settled at $1,866.10. an ounce, down $12.50, or 0.7% on the day. The benchmark for U.S. gold futures was down 4% for the week, its biggest weekly decline since a near 6% plunge during the week to June 11, 2021.

For the third quarter, the drop on Comex gold was around 3%, after declines of 2% in August and 5% in September that offset July’s gain of 4%. In the second quarter, gold futures fell almost 4%.

The spot price of gold, more closely watched by some traders than futures, was at $1,850.20 by 14:00 ET (18:00 GMT), versus the prior session’s settlement of $1,864.56. A week ago, spot gold settled at $1,924.99. At the close of June, it was at $1,919.57..

More significantly, gold gave up in September its hold on the key bullish level of $1,900 an ounce that the yellow metal had held since mid-August. That came after some investors found the dollar — the archrival to — a better safe-haven as U.S. economic growth remained relatively superior to the rest of the world.

Gross domestic product in the United States grew 2.1% year-on-year in the second quarter, after 2.2% in the first. GDP is projected to expand 2.1% for all of 2023. The euro area economy, in contrast, is projected to grow just 0.7% this year.

Bond yields, dollar seen pressuring gold further despite retreat

But more than all these, gold was negatively impacted by a selloff in U.S. bonds that sent the dollar flying as investors chased yields.

Bond yields, benchmarked to the return on the 10-year U.S. Treasury note, hovered at just under 4.58 on Friday after reaching a 16-year high of nearly 4.69 on Thursday.

“Gold is getting crushed here despite some calm in the bond market as investors pile back into equities. Real yields are not backing away anytime soon and that still has gold on the ropes.

The Dollar Index remained stubbornly at around 106 — adding to the weight on gold — after a 10-month high of 106.84 on Wednesday.

The dollar held up despite latest inflation data that raised hopes that the Federal Reserve might extend its hold on interest rates at its November policy meeting. The Personal Consumption Expenditure (PCE) Index, a price gauge closely followed by the Fed, rose 0.4% last month, just below Wall Street expectations for a 0.5% rise.

The Fed left rates unchanged when it last met on September 20, after adding a quarter point in July. It has hiked rates 11 times since March 2022, adding 5.25 percentage points to a prior base that peaked at just 0.25%. While the central bank paused on an increase this month, it maintained projections that a quarter point increase was possible at either one of its remaining two meetings for this year, scheduled in November and December.

Gold also couldn’t catch a safe-haven bid from a looming shutdown of the U.S. government after Republicans in Congress delayed funding to keep public agencies running.

(Ambar Warrick contributed to this item)