Gold prices fell marginally lower on Friday as a strong recovery in U.S. equities curtailed flows into bullion. Nonetheless, the precious metal still managed to finish higher for a fifth straight week. Earlier in the week, the futures market posted a new contract high, while spot gold reached its highest level in nearly nine years.
On Friday, August Comex gold settled at $1801.90, down $1.90 or -0.11%.
Recently, gold has benefited indirectly from the resurgence in COVID-19 cases in the United States and around the world. Rapidly growing reports of COVID-19 infections haven’t been the reason for the rally in gold per se. Ten-year yields are still declining more than the inflation expectations are declining, and that’s been the catalyst behind the rally in gold.
More than 60,500 new coronavirus infections were reported across the United States on Thursday, according to a Reuters tally, the largest one-day increase in any country since the pandemic emerged in China last year.
Demand for Risk Increases on Positive Antiviral Drug News
U.S. stocks advanced on Friday, taking some of the wind out of the gold rally, as a positive update from Gilead’s antiviral drug to treat COVID-19 countered nerves over a record rise in U.S. coronavirus cases.
Gilead Sciences said its coronavirus treatment candidate, remdesivir, showed an improvement in clinical recovery and a 62% reduction in the risk of mortality compared with standard care. The news sent Gilead shares up more than 2%. Meanwhile, BioNTech’s CEO also told The Wall Street Journal the company’s coronavirus vaccine candidate could be ready for approval by December.
Stocks rose on the news and gold prices retreated.
Treasury Yields Bounced Off Their Lows
Gold prices further weakened on Friday after Treasury yields bounced off their lows and traded near the flat line after the announcement from Gilead. The yield on the benchmark 10-year Treasury note were about little changed at 0.599% after hitting its lowest level since April 22 earlier in the session. The yield on the 30-year Treasury bond dipped about 2 basis points.
The rising COVID-19 count is making investors nervous, driving them into Treasurys, which is pushing yields lower, and gold higher.
“The daily COVID-19 stats will presumably contribute to the overall direction of US rates and the backdrop of bullish momentum has already set the tone,” BMO analysts said.
This correlation and the promise the Fed will do whatever it takes to protect the economy should be enough to sustain the long-term rally in gold although it remains vulnerable to short-term corrections.