Forexpros – Gold futures edged lower on Friday, paring a weekly gain after ratings agency Fitch downgraded the credit ratings of Italy and Spain, prompting gold traders to sell their positions to raise cash to cover losses in other markets.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery settled at USD1,639.85 a troy ounce by close of trade on Friday, climbing 0.84% over the week, the first weekly gain in a month.
Fitch cut Italy’s rating to A+ from AA- while Spain’s rating was reduced by two notches to AA- from AA+, citing the worsening euro zone debt crisis and fiscal situation in both countries.
In addition, fellow ratings agency Moody’s put Belgium’s ratings on review for a possible downgrade, citing long-term funding risks and high public debt.
While the news would have normally boosted the safe haven appeal of the precious metal, investors preferred to sell profitable gold holdings to raise cash and cover losses elsewhere.
Gold prices climbed in early Friday trade, following the release of better-than-expected U.S. employment data.
The U.S. Department of Labor said nonfarm payrolls rose by 103,000 in September, nearly doubling expectations for a gain of 53,000. The data showed that payrolls for the previous two months were revised up by a total of 99,000, while the unemployment rate remained unchanged at 9.1% as expected.
Despite the pullback, German lender Deutsche Bank said in a report Friday that it expects gold prices to remain supported amid lingering fears over a Greek debt default, as well as concerns over the outlook for global growth.
On Thursday, gold prices rose 0.8% after the European Central Bank announced measures to boost liquidity to euro zone lenders, while the Bank of England implemented a fresh round of monetary easing measures.
Earlier in the week, gold prices were boosted after Federal Reserve Chairman Ben Bernanke said that the U.S. economic recovery has been far less robust that the Fed had hoped, adding that the central bank was ready to do more to help the U.S. economy.
Elsewhere on the Comex, silver for December delivery settled at USD31.16 a troy ounce by close of trade on Friday, jumping 3.94% on the week, while copper for December delivery settled at USD3.284 a pound, surging 4.98% on the week.
In Friday’s report, Deutsche Bank added that, “Gold will continue to outperform silver and copper in an environment in which Western world growth is under attack,” citing weakening industrial demand for the metals.
In the week ahead, developments in the euro zone look likely to remain in the spotlight, amid ongoing speculation that Greece may have to default. Meanwhile, investors will be looking towards Friday’s U.S. data on retail sales to gauge the strength of the U.S. economic recovery.
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