Gold prices ended slightly higher on Friday but swung to a weekly loss of nearly $100, fueled by a potential slowing of the Federal Reserve’s bond purchases later this year.
Gold for August delivery GCQ3 -0.16% gained $5.80, or 0.5%, to $1,292.10 an ounce, but posted a weekly loss of $95.60.
Yields on the 10-year U.S. Treasury note 10_YEAR +1.45% pushed above 2.5% briefly on Friday and U.S. stocks fluctuated in choppy trading.
The slight rise on Friday was a consequence of buying from bargain hunters, said Vedant Mimani, lead portfolio manager of Atyant Capital’s Global Opportunities Fund.
Still, gains were subdued because of continued selling, he said. “It’s been sold pretty hard during the last two days,” said Mimani. “Now everyone is just waiting.”
The contract had plunged more than 6% during Thursday’s floor trade on the New York Mercantile Exchange, as investors continued to price in the Fed’s possible trimming of its monetary stimulus later this year. The Fed currently buys $85 billion in mortgage and Treasury debt each month as part of its efforts to spur the economy.
After settling Nymex trade at $1,286.20 an ounce, which was the lowest close since September 2010, August gold took further damage on news that exchange operator CME Group Inc. CME -0.39% was hiking margin requirements.
The CME, which owns the Nymex’s metals-trading Comex division, said following Thursday’s close that it would hike initial and maintenance margins for gold by 25%, according to reports.
The increase means speculative traders must have $8,800 to open a 100-troy-ounce position, up from $7,040, and keep $8,000 to hold the contract overnight, up from $6,400, Dow Jones Newswires said.
The new margins would come into effect after Friday’s close, CME said.
The ICE dollar index DXY +0.29% rose to 82.317 in late Friday trade. A stronger U.S. currency tends to weigh on gold and other dollar-denominated commodities, as it makes them more expensive for holders of euros, yen and other units. The relationship between the dollar and gold futures isn’t set in stone and tends to be stronger on days with big moves, said Mimani.
The dollar had rallied since the Federal Reserve’s statement late Wednesday, signaling it could slow its asset purchases this year if the economy improves further.
Gold plunges below $1,300
Traders scramble to sell gold as prices fall to lowest level in nearly three years. Photo: AP
The price action is a recouping of prior-day losses rather than a result of news, said Carlos Sanchez, director of asset management at CPM Group.
He noted that options will expire next week, which should increase volatility as the July contract will become deliverable at the end of June. As a consequence, “you may see some more activity in the silver market as opposed to the gold market toward the end of next week,” said Sanchez.
The July contract for silver SIN3 -0.72% ended up by 14 cents, or 0.7%, to $19.96 an ounce, after dropping $1.80 on Thursday.
Elsewhere in the metals complex, copper for July delivery HGN3 -1.36% settled at $3.10 a pound, up 4 cents or 1.3%, while September palladium PAU3 -0.47% rose $9.65, or 1.5%, to end at $674.75 an ounce.
July platinum PLN3 -0.10% gained $5.70, or 0.4%, to end at $1,369.50 an ounce, after losing more than $60 in Thursday’s Nymex action.