Gold exchange-traded funds headed for the biggest weekly outflow since March as the prospect of a coronavirus vaccine curbed demand for a haven.
Investors have sold almost 18 tons from ETFs so far this week after Pfizer Inc.’s announcement of progress on a shot sparked hopes of a turning point in the fight against the pandemic. Bullion prices rose on Friday as the dollar weakened. The metal is still set for a weekly decline even as virus cases are surging in many nations and top central bankers cautioned that a vaccine wouldn’t end the economic challenges.
“Investors are getting nervous holding long gold positions because every rally runs into a brick wall,” said Georgette Boele, precious metals analyst at ABN Amro Bank NV. “I think there is more to come in the near term.”
Spot gold gained 0.8% at $1,890.98 an ounce by 1:41 p.m. in London. It’s still down 3.1% this week, the most since late September. ETF holdings fell to 3,436.4 tons as of Thursday, the lowest level in six weeks, according to an initial tally by Bloomberg.
Traders are keeping an eye on rising infections. New York prepared for the possibility of school closures, Chicago urged residents to stay at home and California passed 1 million cases. In Europe, the U.K. reported the most infections yet. Federal Reserve Chairman Jerome Powell said the central bank and Congress would probably have to do more to stimulate the recovery in the future.
That should help gold climb in the first half of next year, once the pandemic is under control but loose monetary policy remains, according to Giovanni Staunovo, an analyst at UBS Group AG.
“Gold should find support in the first half as stronger growth expectations — driven by an eventual vaccine rollout — and higher oil prices push inflation expectations higher,” he wrote in a note. The bank lifted its price target for mid-2021 to $2,000 an ounce.
In other precious metals, silver climbed 1.8%, while platinum and palladium also rose. The Bloomberg Dollar Spot Index was down 0.3%, but is still set for a weekly gain.