Gold Price News: Gold Falls Back as US Dollar Strengthens

Gold prices fell for a second straight day on Friday, giving up most of the gains seen in the first half of the week.

Prices eased as low as $2,649 an ounce on Friday, down from around $2,682 an ounce in late trades on Thursday.

The US dollar made gains against other major currencies through the week and this naturally put downward pressure on dollar-denominated gold prices.

Central banks cut rates

The Bank of Canada on Wednesday cut interest rates by 50 basis points to 3.25%. This was followed by the Swiss National Bank which cut rates by 50 basis points on Thursday, as well as the European Central Bank which made a smaller 25 basis point cut to 3.15% – all in line with market expectations. The latest cuts come in the context of broad expectations that the US Fed will follow suit with a 25 basis-point cut on Wednesday this week.

However, the latest monetary policy decisions were not enough to support gold, leaving the price drifting lower on Thursday and Friday, albeit with prices managing to post a modest 0.7% week-on-week gain.

Market positioning

Net long positions on the Comex platform rose for the third straight week in the week ending December 10^th, according to World Gold Council data. Net long positions increased to 862.9 tonnes, compared with 803.2 tonnes in the week to December 3^rd, the figures showed: Gold Open Interest Chart 2021 | World Gold Council. The positioning on Comex is suggestive of a renewed bullish sentiment in the market, although net longs are still below their recent peak of 976.46 tonnes in the week ending September 24^th.

Upcoming events

Looking ahead, Monday will bring December manufacturing and services data for the Euro Area and UK, followed later by similar figures for the US economy. Then on Tuesday, the markets will be watching out for US industrial production figures for November, adding further to the latest snapshot on the health of the US economy. The big-ticket item this week will be Wednesday’s US Fed interest rate decision, with the markets currently allocating a 95% probability of a 25-basis-point cut, based on data from interest rate traders.