Gold Slides Setting Up First Back-To-Back Weekly Plunge Since March

Gold futures came under significant pressure on August 21, 2020, for a third consecutive session. Commodity experts are pointing to a resurgence in the United States dollar as the most likely cause for bullion’s recent downtrend.
The dollar gained 0.5% early on Friday which put a measure of the buck against about six currencies, the ICE Dollar Index. The US currency is on track for a weekly rise of 0.2%, prompted partly by comments that came from the Federal Reserve.
The comments implied that the central bank is not yet willing to implement unconventional strategies to hold interest rates lower. They want to keep it low for more months amid the current COVID-19 health crisis. Lukman Otunuga, a senior research analyst, wrote in a note:
“Gold bulls have been missing in action this week as investors digested the latest Fed minutes which temporarily injected life into the dollar.”
Analysts see the long-term outlook for gold as strong. Otunuga added:
“Regardless of recent losses, the fundamentals remain in favor of higher gold prices with a rebound potentially on the cards.”
Underlying Factors
He said that the current weakness in government debt rates, with the 10-year Treasury note yield trading between 0.80% and 0.60% in recent weeks, and worries about the outcome of the forthcoming US elections may act as bullish factors for bullion. Otunuga stated:
“A broadly weaker Dollar, negative US yields, pre-election jitters and rising coronavirus cases in the United States; are likely to keep gold shining in the medium to long term.”
On August 20, Joe Biden formally accepted the Democratic presidential nomination and cast himself as a capable leader. He said that he is ready, willing, and committed to steering the US out of the COVID-19 pandemic. Biden set the stage in November for a battle with Republican incumbent President Donald Trump.
December gold-headed $20.30 or 1% at $1,926 per ounce after it declined 1.2% on Thursday. For this week, gold is on pace for a 1.2% weekly skid. A weekly drop for gold would mark its first back-to-back weekly slide since the period that ended on March 20; according to FactSet data.
In the meantime, September silver prices SIU20, -1.24% was 95 cents, or 3.4%, lower at $26.175 an ounce after it lost 0.7% the previous day. The industrial metal is looking at a 0.3% weekly slide.
If the US dollar continues to gain its strength, the precious metal markets will continue sliding. However, analysts believe that the current health crisis will continue supporting the rise in the price of gold and silver.