Gold poised for weekly gain on softer dollar

Bengaluru — Gold was set for a third consecutive weekly gain on Friday as weaker US bond yields and dollar bolstered its appeal, with investors focusing on how the Federal Reserve responds to higher inflation and concerns over tepid economic growth.

Spot gold fell 0.1% to $1,797.16/oz by 3.56am GMT, but has gained 0.2% so far this week. US gold futures dropped 0.3% to $1,797.60/oz.

Benchmark 10-year US treasury yields were set for their biggest weekly decline in three months, reducing the opportunity cost of holding non-yielding bullion.

The dollar was headed for a third straight weekly decline, making gold more attractive to buyers holding other currencies.

Market participants now await the Fed policy meeting next week. Data showed the US economy grew at the slowest pace in more than a year last quarter, while consumers’ inflation expectations over the next 12 months jumped to a 13-year high.

“The baseline is that the Fed wants to be done tapering by mid-2022, but there’s the risk of a more hawkish Fed if it suggests it could be open to tapering faster, which should strengthen the dollar and weaken gold,” DailyFX currency strategist Ilya Spivak said.

Reduced stimulus and interest rate hikes tend to push government bond yields and the dollar up, denting gold’s appeal.

“We should see a slow grind lower in gold towards $1,700 and possibly under it into year-end,” Spivak said.

Analysts in a Reuters poll trimmed their gold price forecasts for the rest of this year and next.

In another poll, analysts lowered forecasts for palladium and platinum prices this year and next as a chip shortage hurts the production of vehicles containing the metals.

Platinum rose 0.1% to $1,019.83/oz, while palladium gained 0.3% to $1,994.64/oz.

Spot silver fell 0.7% to $23.94/oz and was set for its worst week since mid-September.

Reuters