Gold set for weekly loss on stronger dollar, US budget stand-off

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Gold snapped a three-day losing streak on Friday, but was still heading for a weekly decline as its safe-haven appeal dimmed and the dollar rebounded on signs the U.S. government was taking steps towards resolving its budget impasse. Gold has been trading in a tight range since the U.S. shutdown began last week, with investors believing worries over raising the debt ceiling would be only short-lived.
Soft physical demand, lack of economic data and outflows from gold backed exchange-traded funds (ETFs) have also dragged on prices. “The market has lost some support as the U.S. looks closer to a bipartisan deal,” said Victor Thianpiriya, an analyst at ANZ.
“ETF selling has resumed, indicating that sentiment is worsening,” he added. “The only support in the market right now is China, and that is a little bit stronger today with the move below $1,300.”
Spot gold had risen 0.4 percent to $1,291.24 an ounce by 0318 GMT, after dropping for three straight sessions. The metal was headed for a 1.5 percent weekly drop – its sixth decline in seven weeks, bringing the year’s losses to 23 percent. Some traders said prices could stay below $1,300 an ounce due to a lack of strong fundamentals. But short-covering and a pick up in physical buying could boost prices in the near term.
“There are signs of a short-covering technical rebound after prices touched a one and a half week low of $1,282,” said Phillip Futures analyst Joyce Liu. Liu said gold prices could fall below June lows of $1,180.71 in the next few months.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dropped 0.2 percent, or 1.80 tons, to 896.38 tons on Thursday. That marked a fresh four-year low.
The ETF, seen as the best measure of gold investor sentiment due to the amount of bullion it holds, has seen outflows of about 400 tons this year.
Precious metals prices 0318 GMT

Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1291.24 5.67 0.44 -22.89
Spot Silver 21.64 0.02 0.09 -28.53
Spot Platinum 1385.49 5.49 0.4 -9.74
Spot Palladium 707 1 0.14 2.17
COMEX GOLD DEC3 1291.8 -5.1 -0.39 -22.91 15762
COMEX SILVER DE C3 21.68 -0.22 -1.01 -28.48 4348
Euro/Dollar 1.354
Dollar/Yen 98.53

COMEX gold and silver contracts show the most active months
Source: Reuters

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