The results of the past week: prices for yellow metal decreased amid rising yields of US government bonds and an increase in investor interest in risk assets, despite news of a possible default by the largest Chinese developer Evergrande Group.
The US dollar index declined due to expectations of a statement by Fed Chairman Jerome Powell to reduce asset purchases. The weakening dollar was supposed to increase the attractiveness of precious metal, but the likelihood of raising interest rates stopped investors from investing in physical metal. If the Fed raises rates in the near future, this could affect the increase in alternative costs of holding gold.
Xiao Fu, head of commodity market analysis at Bank of China International (China), said the Fed's announcement of lower asset purchases would not surprise investors. As soon as this process begins, yellow metal quotes can fall to $1,700 or lower.
Investors' investments in risk assets increased amid news from one of the leading Chinese developers Evergrande Group. Shares of the developer on Thursday increased by 10.6% after a strong fall at the beginning of the week due to problems with a large volume of debts.
Vincent Tee, sales manager at Singapore's Silver Bullion, noted that investors will buy precious metal as a protective asset, hoping to keep their capital from the growing "bubble" in the equity and bond market. In addition, gold is an instrument for hedging high inflation and geopolitical uncertainty.