Gold Shines for the First Time in 3 Weeks

What’s happening: Gold prices closed higher on Friday to record weekly gains for the first time in three weeks.

What happened: Gold has been the favoured safe-haven asset amid the uncertainties caused by the pandemic and resulting concerns about the global economy.

The announcement of a shift in monetary policy by the US Federal Reserve led to volatile trading during the session on Thursday, and declining investor risk appetite lent support to the yellow metal during the last trading session of the week.

Why it matters: Gold prices has been on an uptrend since the covid-19 outbreak began. The yellow metal breached the $2,000 per ounce resistance level earlier this month. Although gold couldn’t hold above that level for long, it has been testing the $1970 level for a couple of weeks now.

The Federal Reserve Chairman Jerome Powell announced a shift in the central bank’s monetary policy, deciding to hold interest rates near zero till inflation rises past its 2% target.

Amid a volatile session on Thursday, the bullion moved higher immediately after the Fed’s announcement, but settled lower for the day. The decline was triggered by profit taking, as investors tried to comprehend the implications of the central bank’s move.

Gold prices regained momentum on Friday, with the rally being supported by a weakening greenback. The US dollar delivered a sharp decline on Friday, with growing strength in the yen on news of Japanese Prime Minister Shinzo Abe resigning due to worsening health conditions. The ICE Dollar Index, which measures the greenback’s performance versus major currencies, declined around 8% to 92.30 on Friday.

Gold surged on Friday with prices climbing above $1,970 during the session. December gold jumped $42.30, or 2.2%, to close at $1,974.90 an ounce on Friday, recording a weekly gain of 1.4%. This was the metal’s first weekly rise in three weeks.

December silver gained 2.2% to settle at $27.79 an ounce in the prior session, notching a weekly rise of around 4%. Meanwhile, December copper rose 1% to $3.0195 a pound, gaining 3.5% for the week.

What to watch: Investors will be keeping an eye on the US jobs report, which is due to be released later in the week. A strong jobs report will boost investor confidence in the US economy and support the greenback, lowering interest for precious metal. Gold is likely to continue last week’s positive momentum today, with gold futures trading higher by 0.2% to $1,979.00 an ounce during the Asian session.

European stocks will be in focus today, ahead of a basket of economic reports from various countries of the region.

Context: European stocks closed mostly lower on Friday as investors assessed the US Federal Reserve’s policy shift and the resignation of Japanese Prime Minister Shinzo Abe.

Details: France announced that its economy contracted by 13.8% in the second quarter. Investor sentiment was supported by an increase in household consumption by 0.5% in July. Meanwhile, Spain’s retail sales declined 3.9% in July, recording a small improvement versus the prior reading.

The pan-European Stoxx 600 index fell 0.5% on Friday, with most sectors closing in negative territory. Europe’s banking index climbed around 1.7% in the prior session following comments by Fed Chairman Jerome Powell. Despite the decline on Friday, the European index ended the week with gained of more than 1%.

London’s FTSE 100 index fell 0.6%, while German DAX 30 slipped 0.5% during the previous session.

Shares of Rolls-Royce plummeted around 3% on Friday, after the engine maker announced plans to sell its assets in a bid to raise £2 billion.

What to watch: Markets awaiting inflation and current account figures from Spain, Italy’s GDP growth and consumer prices from Italy as well as Germany’s inflation rate.

Investors will continue to monitor the covid-19 numbers, with total cases surging past 25.1 million globally.

Other Markets: US indices trading closed higher on Friday, with the Dow Jones index, S&P 500 and the Nasdaq 100 up by 0.57%, 0.67% and 0.60%, respectively.

South Africa’s money supply M3, private sector credit and balance of trade, Turkey’s GDP annual growth rate and balance of trade, Brazil’s government budget value, Canada’s value of building permits, producer prices and raw materials prices, Russia’s money supply M2, Saudi Arabia’s money supply M3 and bank lending growth as well as the US Dallas Fed manufacturing index.