By Barani Krishnan
Investing.com – Gold longs saw a second straight week of gains but not before a rollercoaster ride on Friday that took them to the euphoria of $1,800 levels, then a plunge and finally a positive close.
U.S. gold futures’ most active contract, December, settled at $1,796.30 per ounce on New York’s Comex, up $14.40, or 0.8%. Earlier in the session, December gold shot up to $1,815.50, only the second time in a week that it has gotten past the $1,800 level.
For the week, the benchmark gold futures contract settled up 1.6%, extending the previous week’s gain of 0.6%.
Friday’s swings in gold were triggered by Federal Chairman Jerome Powell, who during a virtual appearance at a Bank of International Settlements event, confirmed the central bank’s plans to start tapering its monthly stimulus of $120 billion between November and December, while holding out on giving a timeline for rate hikes.
Markets had been on tenterhooks for months over the timing of the stimulus taper. With that known, the speculation has moved on to rates.
Gold wasn’t the only market tossed around in Friday’s session: the S&P 500 went from a record high to negative by midday.
It was also one of those odd days when the trifecta of gold, the dollar and bond yields fell, indicating that investors were basically clueless on what to do.
“The key takeaway from Powell was that the Fed is on track to begin tapering and that should be done by mid-2022, transitory inflation might last a little longer than expected, and that rate hike expectations should be written in pencil,” said Ed Moya, analyst at online trading platform OANDA.
That gold still finished in the positive and up more than 1.5% on the week was still proof of its inherent strength after weeks of being caught in the mid to lower $1,700 levels, said Moya.
“Wall Street knows that negative real yields will remain well into next year and that that gold will reassert itself as an inflation hedge,” he added.