By Barani Krishnan
Investing.com - Gold longs, clinging by their nails to $1,800 territory, saw the yellow metal’s first weekly loss in five as it remained disconnected from expectations of steady inflation in the United States.
A volatile week in risk markets which culminated in outsized gains for stocks also left safe havens such as gold sidelined.
“Gold is softer as risk appetite runs wild, with the S&P 500 index making a fresh intraday record high following robust earnings and as Treasury yields appear poised to close near this week’s high,” noted Ed Moya, head of research for the Americas at broker OANDA.
Front-month gold futures on New York’s Comex settled down $3.60, or 0.2%, at $1,801.80 an ounce.
For the week, it slid 0.8%, after gaining 2.6% over four previous weeks.
Gold is also having an uncertain week due to the blackout period for speeches by Federal Reserve officials ahead the central bank’s policy meeting on July 27 and 28.
Conviction has become a rare commodity in gold as the average long investor tried to stay true to the yellow metal through its travails of the past six months.
Since January, gold has been on a tough ride that actually began in August last year — when it came off record highs above $2,000 and meandered for a few months before stumbling into a systemic decay from November, when the first breakthroughs in Covid-19 vaccine efficiencies were announced. At one point, gold raked a near 11-month bottom at under $1,674.
After appearing to break that dark spell with a bounce back to $1,905 in May, gold saw a new round of short-selling that took it back to $1,800 levels before talk of monetary tightening by the Federal Reserve knocked it even lower to mid-$1,700 levels.
For the record, the Fed has indicated that it expects two hikes before 2023 that will bring interest rates within a range of 0.5% to 0.75% from a current pandemic-era super-low of zero to 0.25%. It has not set a timetable for the tapering or complete freeze of the $120 billion in bonds and other assets it has been buying since March 2020 to support the economy through the Covid crisis.
Also, somewhat lost in the whole transition is gold’s position as a hedge against inflation despite trillions of dollars of government spending since the outbreak of the pandemic.
The Fed’s preferred inflation gauge, the Personal Consumption Expenditure Index, meanwhile, grew by a multi-year high of 3.4 percent in the 12 months to May.
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