Metals Stocks: Gold pulls back but set to end the week sharply higher

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Gold prices on Friday pulled back from their highest level in more than two months as global stocks attempted to rebound from a two-day downturn that had driven investors to the perceived safety of the precious metal.

December gold
GCZ8, -0.41%
 was down $1, or 0.1%, at $1,226.60 an ounce, a day after its highest finish since Aug. 1 for a most-active contract, according to FactSet data. Meanwhile, December
SIZ8, +0.47%
 silver rose 4 cents, or 0.3%, at $14.65 an ounce, following a 2% gain on Thursday.

For the week, gold was on track to climb 1.6%, while silver was set to end the week virtually unchanged, based on last Friday’s settlements for the contracts.

Friday’s slight retreat for gold occurred as the Dow Jones Industrial Average
DJIA, -2.13%
S&P 500
SPX, -2.06%
 and the Nasdaq Composite Index
COMP, -1.25%
 appeared set to bounce back from punishing declines of the past two days.

Recent equity-market volatility has been underpinned by concerns over rising Treasury rates
TMUBMUSD10Y, +0.28%
 . A rapid rise in rates also has coincided with weakness in the U.S. dollar, which has helped to remove a headwind for the precious commodity. Gold tends to gain when the dollar is weaker because the assets become relatively more attractive to buyers using other monetary units.

On Friday, one popular measure of the buck, the ICE U.S. Dollar Index
DXY, +0.22%
was up 0.1% at 95.15.

Still, investors were offering guarded enthusiasm for precious metals.

“Although gold prices are noticeably weaker this morning, bulls remain in the driving seat above the $1,213 level. While the technical outlook points to further upside, fundamentals are still in the bear’s favour. With the Dollar supported by safe-haven flows and prospects of higher U.S. interest, the medium- to longer-term outlook remains negative for gold,” wrote Lukman Otunuga, research analyst at FXTM.

The Federal Reserve has hiked interest rates three times this year and may do so a fourth time before year-end, which could provide some resistance to gold bulls because rising rates are likely to juice the dollar and make risk-free government bonds a more attractive investment when compared against bullion.

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