Gold heads higher as dollar weakens

Gold rose on Friday and was set to post a third straight weekly gain after US President Joe Biden’s proposal to hike capital gains tax weighed on US Treasury yields, while a weaker dollar also bolstered the metal’s appeal.

Spot gold was up 0.2% at $1,786.87/oz at 3.32am GMT. The metal jumped to its highest since February 25 at $1,797.67/oz on Thursday, and has added about 0.6% so far this week. US gold futures rose 0.3% to $1,786.90/oz.

“The knock-on effect from the tax hike [proposal] is attracting bond investors and the yields have dropped, and this is providing a little bit of lift-off for gold,” said Stephen Innes, chief global market strategist at financial services firm Axi. “The big question now facing gold markets is a decision on how the US Federal Reserve is going to play next week.”

US 10-year Treasury yield ticked lower on news that Biden will roll out a plan to raise taxes for high earners. A subdued dollar also raised gold’s appeal for other currency holders.

Underlining a revival in Asian bullion demand, shipments to India leapt to their highest since 2013, driving Swiss gold exports to a 10-month high. Despite signs of strong pent-up demand for physical gold in India, rising coronavirus cases and renewed lockdown measures are threatening to kill off that revival, ANZ analysts wrote in a note. India recorded the world’s highest daily tally of Covid-19 infections on Thursday.

Palladium rose 0.1% to $2,840.20/oz but was off a record $2,891.50/oz hit on Thursday. Many analysts expect a further run towards $3,000 levels as automakers ramp up purchases of the metal, worsening a supply shortage. Silver was little changed at $26.16/oz but set for a third straight weekly gain. Platinum rose 0.1% to $1,204.77/oz.