Forexpros – Gold futures advanced for the first time in five days on Friday, paring a weekly decline as a broadly weaker U.S. dollar boosted the appeal of the precious metal ahead of a key weekend summit of euro zone policy makers.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery settled at USD1,642.85 a troy ounce by close of trade on Friday, dropping 2.45% over the week, the first weekly loss in three weeks.
Gold futures jumped 1.85% on Friday as investors positioned themselves in the precious metal ahead of a series of weekend meetings in Brussels by European government and finance officials.
Euro zone policy makers were expected to work out a plan to recapitalize the region’s banks, bolster the firepower of the European Financial Stability Facility and restructure Greek sovereign debt.
French President Nicolas Sarkozy and German Chancellor Angela Merkel issued a joint statement saying the leaders would put forth a plan by Wednesday at the latest.
Gold prices found further support after Federal Reserve Vice Chairman Janet Yellen said that a third round of large-scale securities purchases might be warranted to prop up the U.S. economy, boosting speculation over further easing.
The comments followed Fed Governor Daniel Tarullo’s call on Thursday for a resumption of large-scale purchases of mortgage bonds.
The U.S. dollar came under broad selling pressure following the speech, with the dollar index slumping 0.91% to settle at 76.52 by close of trade Friday, the lowest level since September 9.
Dollar weakness usually benefits gold, as it boosts the metal’s appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Gold prices fell nearly 2.1% on Thursday to hit a two-week low as investors awaited further developments over plans to resolve the euro zone’s debt crisis.
For much of the last year, investors’ typical reaction to bad news from Europe was to buy gold on the view that it holds its value better than other assets during economic turmoil, but that relationship hasn’t held up recently.
Instead, gold futures have moved largely in line with commodities and other risk-sensitive assets over the past month.
Elsewhere on the Comex, silver for December delivery settled at USD31.36 a troy ounce by close of trade on Friday, slumping 2.63% on the week, while copper for December delivery settled at USD3.257 a pound, tumbling 5% over the week.
In the week ahead, investors will be closely watching developments in the euro zone, amid hopes for a breakthrough on dealing with the deepening debt crisis in the region. Markets will also be eyeing Thursday’s U.S. data on third quarter economic growth in order to gauge the strength of the U.S. recovery.
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