Last week gold futures went down by 3.38 percent, breaking a nine-week gaining streak and closing Friday's session at the 1,949.80 level. Conversely, silver futures dropped by 5.27 percent during the week, closing Friday's session at the 26.089 level.
It seems that the recent positive data about the performance of the US economy is weighing on Gold's performance, which tends to be favored when there is an unease in markets and tends to lose territory when investors preferences shift towards riskier assets.
On Thursday, the markets learned that Initial Jobless Claims fell below 1 million for the first time in 21 weeks standing at around 963,000 and below the analysts' expectations, who foresaw it to increase by 1.1 million. On Friday, the US Department of Labor released the Non-farm Productivity figure, which went up by 7.3 percent on the second quarter after falling by 0.3 percent on the previous one, while the US Census Bureau released July's Retail Sales Control Group which stood at 1.4 percent after being at 6 percent on June. July's Retail Sales figure stood at 1.2 percent (month-to-month), showing a more moderate recovery from the previous month's figure which stood at 8.4 percent.
The Industrial sector also gave signs of experiencing a moderate recovery, as the Board of Governors of the Federal Reserve released its Industrial Production figure, which stood at 3 percent in July (month-to-month) after being at 5.7 percent in June. The Michigan Consumer Sentiment stood at 72.8 on august according to recently released preliminary figures, after being at 72.5 on the previous month.
Added to this is the recent announcement of the Russian government, which claimed that it already produced the first batch of the Covid-19 vaccine, hindering the expectations for a second outbreak. Nevertheless, doubts persist regarding the Russian announcement, so it may be prudent to wait to see this new vaccine in action before making a judgment. At the moment there are 21,631,766 confirmed coronavirus cases around the world, as well as 769,221 total deaths. The United States leads in the number of infections, with 5,529,789 confirmed cases as well as a death toll of 172,606, followed by Brazil, India, and Russia.
The positive data drove up the US stock markets, as the S&P 500 posted gains for the third consecutive week, advancing 0.64 percent and closing the week at the 3,372.85 level. Conversely, the Dow Jones Industrial Average posted gains for the second consecutive week, gaining 1.81 percent and closing the week at the 27,931.02 level, while the Nasdaq 100 advanced for the third consecutive week, gaining 0.22 percent and closing Friday's session at the 11,164.45 level.
Despite the improving market sentiment and the good prospects for the American economy, given that the fate of the stimulus talks between the Democrat and Republican parties is not clear and that the Federal Reserve may not be changing its monetary policy stance soon, there may still be a chance for Gold enthusiasts.
The US dollar continues losing territory as well, dropping 0.36 percent against a bundle of its main competitors last week. Inflation is also rising, as both the CPI and the core CPI jumped by 0.6 percent (month-to-month), in yearly terms the CPI went up by 10 percent while the core CPI increased by 1.6 percent, according to data released by the Labor Department.
Inflationary trends, together with a weak dollar and a loose monetary policy tend to favor the performance of precious metals, especially Gold's, as it's considered a hedge against inflation and it's extensively used to protect the portfolio against the adverse effects of weakening fiat currencies.