Gold futures on Friday traded slightly lower, but were on track to book the strongest weekly advance in about two months as the precious metal scored a boost from central bank moves, including the Federal Reserve’s decision to hold off on hiking interest rates in September.
December gold GCZ6, -0.29% slipped $1.50, or 0.1%, to $1,343.40 an ounce, and was aiming for a 2.5% weekly advance, which would represent its biggest weekly gain since the week ended July 29, according to FactSet data.
Gold has benefited from sluggishness in the global economy that has driven the Bank of Japan to adopt radical tactics to help boost stubbornly low inflation and boost economic growth. That environment and the Fed’s support of a take-it-slow approach to raising benchmark U.S. interest rates have combined to weaken the dollar and lift commodities priced in the currency, like precious metals.
Friday’s pause in gains for precious metals, including silver, comes as the dollar was trading flat in a week that sees the greenback on pace for a 0.6% weekly decline, as gauged the ICE U.S. Dollar Index DXY, +0.26% a measure of the buck’s performance against six major rivals.
Julian Phillips, founder of and contributor to GoldForecaster.com, in a Friday research note said gold prices have been facing technical resistance at the $1,340 to $1,350-an-ounce range. He said “a break through this level would signal overhead resistance has been defeated,”—a bullish sign for the metal.
Meanwhile, silver for December delivery SIZ6, -1.01% was down 13 cents, or 0.6%, at $19.97 an ounce, with a weekly gain of 5.9% in sight.
Joni Teves commodity strategist at UBS, said the outlook for gold remains strong, given the expectations for a pickup in physical demand for the yellow metal.
“We think there is a good potential for physical offtake in India to improve over the next couple of months, especially if prices weaken further from here. We anticipate that during the key season, physical markets could reassert their role as a source of support for the market,” Teves said in a Thursday note.
That said, the UBS analyst didn’t expect the rise from a seasonal increase in gold appetite in regions like India where festivals and weddings tend to lead to elevated gold purchases, to lead to a price surge.
Elsewhere, the exchanged-traded, silver-focused iShares Silver Trust SLV, -0.42% was flat, while the SPDR Gold Trust GLD, +0.06% was up 0.2%, and the goldminers ETF, the VanEck Vectors Gold Miners ETF GDX, -0.68% rose 0.7%.
“Looking back over the week, we have seen overall U.S. demand for the shares of U.S. based gold ETFs strong and sales standing back waiting to see where gold prices will go from here. A critical question to ask is, ‘Have the major sellers exited the market?’ If they have we could see decisive action from physical gold demand ahead.” said Phillips.