Gold prices fell on Friday, settling at their lowest level in nearly five months as the U.S. dollar and stocks firmed in the wake of stronger-than-expected U.S. jobs data for November.
Gains in the U.S. dollar and stocks and another surge this week for bitcoin, though the cryptocurrency did pull back on Friday, dulled demand for the haven metal, while the interest-rate picture continues to play out as a backdrop for metals trading.
February gold GCG8, -0.21% declined by $4.70, or 0.4%, to settle at $1,248.40 an ounce. Prices settled at their lowest since July 20, according to FactSet data. Gold was down about 2.6% for the week, for a third straight weekly loss. The SPDR Gold Trust ETF GLD, -0.01% fell less than 0.1%, set for a weekly loss of 2.6%. The VanEck Vectors Gold Miners ETF GDX, +0.46% was up 0.2%, paring its weekly loss to 3.9%.
The Labor Department said the U.S. economy created 228,000 jobs in November, underlining a robust economic picture.
The data will do nothing to dent expectations the Federal Reserve will deliver a widely anticipated rate increase when it meets next week. Investors will be hungry for clues about the likelihood of follow-up hikes next year. Higher rates cut demand for nonyielding bullion.
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“The solid jobs report implies the Fed can remain on a path of higher interest rates well into 2018,” said Rob Haworth, senior investment strategist for U.S. Bank Wealth Management. “Higher rates, and higher real rates, especially since wage inflation appears stable for now, are likely pressuring gold.”
Still, Fiona Cincotta, a senior market analyst at City Index, noted that “the lower-than-forecast hourly wage data doesn’t help resolve the Fed’s inflation mystery and the lack of relationship between the number of jobs being created and the hourly wages.
“Investors are increasingly concerned that the Fed could ease back on interest rate hikes next year, until hourly wages and inflation start to move more convincingly higher,” she said.
For now, the ICE U.S. Dollar DXY, +0.16% firmed 0.1% to 93.92—trading around 1.1% higher for the week.
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U.S. stocks, meanwhile, turned higher for the week after the jobs report, drawing more investors away from haven gold.
But in an annual outlook, analysts at Commerzbank said they believe “the environment for gold will remain constructive in 2018.”
“Real interest rates remain at a low—and in some cases negative—level. The opportunity costs of holding gold thus remain close to zero or indeed negative, which points to stronger investment demand in the West,” they said. “Numerous political uncertainty factors in Europe and the U.S., as well as a number of potential sources of geopolitical crisis, are likely to boost demand for gold additionally.”
Commerzbank pegs spot gold at $1,350 per ounce by the end of 2018.
In other metals trading, March silver SIH8, +0.43% rose 0.1% to $15.823 an ounce, though ended around 3.5% lower on the week. The iShares Silver Trust SLV, +0.61% rose 0.3%, but it was still down around 4% for the week.
Looking ahead, Commerzbank analysts expect silver’s industrial-demand catalysts to become more dynamic in 2018. They expect the white metal to trade at $18 by the end of 2018.
March copper HGH8, +0.56% rose 0.5%, to $2.979 a pound, still settling 3.7% lower on the week.
January platinum PLF8, -0.78% fell 1.2% to $883.70 an ounce—down about 6.1% from the week-ago settlement, while March palladium PAH8, -0.44% fell 0.7% to $996.40 an ounce, for a weekly loss of 2%.