Gold slipped on Friday as the dollar rebounded, while platinum took a breather after expectations of a rebound in industrial demand drove a rally to a more than six-year peak and put it on course for its best week in two months.
Spot gold fell 0.6% to $1,815.30 per ounce by 1009 GMT.
U.S. gold futures slipped 0.5% to $1,816.90.
The dollar edged up 0.2%, reducing gold’s appeal for other currency holders.
“The inverse relationship between gold and the dollar has been strong recently and the rebound in the dollar has had a negative impact,” David Madden, market analyst at CMC Markets UK, said.
Strength in European shares, which are set for a second consecutive week of gains, also weighed on safe-haven gold.
Still expectations for a stimulus package in the United States helped to put gold prices on course for a 0.2% rise this week, which would be its first weekly rise in three. Investors often buy gold to hedge possible risks of inflation that could be spurred by massive stimulus.
“Our thesis for the next year or two is that equities and gold are going to do well because of inflationary expectations and monetary and fiscal stimulus remain supportive for both,” said Hitesh Jain, lead analyst at Mumbai-based Yes Securities, adding that the metal could rise to $1,950 this year.
Spot platinum fell 1% to $1,222.47 an ounce after prices scaled a more than six-year peak of $1,268.88 on Thursday.
The autocatalyst metal was set for an 8.9% weekly gain, which would be its best since early December.
“Reports that some future and derivative exchanges have increased their margin requirements have put the brakes on the demand for platinum,” CMC’s Madden said.
But expectations for a rebound in industrial production and the automotive sector this year should lift the metal, he added.
Silver gained 0.2% to $26.99 an ounce and palladium rose 0.1% to $2,347.97.
Global Demand for Investment Gold Plunged by 70% YoY to 161 Metric Tons in Q1 2021
Last year, investors flocked to gold as stock markets crashed on a gloomy economic outlook due to the spread of the COVID-19 pandemic. In the second quarter of 2020, global demand for investment gold surged to over 591 metric tons, the second-highest level since 2016. However, the investors’ demand for gold has dropped significantly this year.
According to data compiled by AksjeBloggen, global demand for investment gold plunged by 70% year-over-year to 161 metric tons in the first quarter of 2021.
The Lowest Quarterly Figures after Record Gold Investments in 2020
In 2016, the global gold demand amounted to 4,309 metric tons, revealed Statista and the World Gold Council data. By the end of 2019, this figure rose to 4,356 metric tons. Investment gold accounted for 30% of that amount. Worldwide gold jewelry demand volumes reached 2,118 metric tons that year. Central banks and technology followed with 648 and 326 metric tons, respectively.
Statistics show the global demand for investment gold surged amid the COVID-19 outbreak, growing by 35% YoY to almost 1,800 metric tons in 2020. Demands for gold used in technology also rose by 17% to 383.4 metric tons, while central banks and other institutions bought 326.2 metric tons of gold in 2020, a 50% plunge in a year.
However, after record gold investments in 2020, the global demand for gold for investment purposes dropped to the lowest quarterly level in years.
The Price of Gold Dropped by 5% Since January
The average gold value tends to increase during a recession, making it an attractive investment in uncertain times. In February 2019, a troy ounce of gold cost $1,320.07, revealed the Statista and World Gold Council data. By the end of that year, the price of gold rose to $1,479.13.
The gold price continued growing throughout 2020, reaching an all-time high of over $2,000 in August. By the end of the year, the precious metal price slipped to $1,864 and then rose to over $1,950 in January 2021.
However, the first quarter of the year brought a negative trend, with the price of gold falling to $1,684 by the end of March. Statistics indicate the price of gold stood at around $1,860 last week, a 5% drop since the beginning of the year.
Gold, Other Safe Haven Assets Plunge Ahead of Fed Rate Hikes
Gold and other safe-haven assets plunged last week as the Federal Reserve signals the possibility of raising interest rates twice in 2023 given the ongoing economic recovery post-COVID-19.
The price of gold dropped by 6.04 percent last week as investors rushed to move their funds out of safe-haven assets including the new gold, cryptocurrency.
The entire crypto space sheds $898 billion in market value to hover around $1.625 trillion last week, down from $2.523 trillion recorded on Wednesday 12, 2021. Its highest market capitalisation till date.
The Federal Reserve raised inflation expectations to 3.4 percent and shifted the year it is expected to increase interest rates from near-zero to 2023 from the previously projected 2024.
The new hawkish stance of the central bank led to capital outflow from safe havens and subsequently boosted dollar attraction.
The United States Dollar gained across the board with the dollar index that tracks its performance against six major currencies, rising by 0.63 percent to 91.103 last week.
However, on Monday morning the gold showed signs of recovery, gaining 0.5 percent to $1,772.34 per ounce following the retreat in U.S. treasury yield that boosted the attraction of non-yielding metal.
Bitcoin, the most dominant cryptocurrency coin, pared losses to $33,245 per coin, up from the $32,658 decline it posted last week.
Gold Advances to Three-Month High on Virus Woes, Inflation
Gold rose to the highest in more than three months as concerns over the pace of a global recovery crept back in following a flareup in coronavirus cases in parts of Asia.
The pandemic is wiping out “entire families” in villages in India, where more people are saying the scale of the crisis is much bigger than official numbers reveal. The World Economic Forum is canceling the annual meeting it was planning to hold this August in Singapore, while cases in Thailand have surged.
Investors will turn to the minutes from the Federal Reserve’s April meeting due Wednesday for potential clues to officials’ views on the recovery and how they define “transitory” when it comes to inflation. Fed Vice Chair Richard Clarida said Monday that the weaker-than-expected U.S. jobs report for April showed the economy had not yet reached the threshold to warrant scaling back the central bank’s massive bond purchases. Meanwhile, Fed Bank of Dallas President Robert Kaplan said supply and demand imbalances and base effects will contribute to elevated inflation this year, but he expects price pressures to ease in 2022.
Gold’s rebound puts it close to erasing this year’s declines, with recent inflows into bullion-backed exchange-traded funds signaling a boost to investor sentiment. Expectations for further increases in consumer prices could start to bolster demand for gold as a hedge.
“It seems inflation fears are finally translating into higher precious metals prices,” said John Feeney, business development manager at Sydney-based bullion dealer Guardian Gold Australia. “ETF investors are starting to swing into net-buyers again, after the recent consolidation, and it makes sense for the metals to play catch up to the recent moves higher in other commodities. We also have a lot of uncertainty with Covid-19 strains and mutations in the Asia-Pacific region that would be leading to safe haven buying.”
Spot gold rose as much as 0.4% to $1,873.82 an ounce, the highest since Jan. 29, and was at $1,868.01 by 12:16 p.m. in Singapore. Silver and palladium gained, while platinum steadied. The Bloomberg Dollar Spot Index fell 0.1%.
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