By Ranjeetha Pakiam and Eddie Spence
(Bloomberg) – Gold headed for a third straight weekly gain as the dollar continued to trend down, with investors weighing signs of inflation and economic recovery.
Traders mostly shrugged off concerns over Federal Reserve minutes Wednesday that showed some policy makers are open to talking about tapering bond purchases, focusing instead on the US central bank’s accommodative stance. Meanwhile, applications for US state unemployment insurance fell last week to a fresh pandemic low, signalling steady improvement in the job market as remaining business restrictions are lifted.
Bullion is trading near the highest level in more than four months amid rising inflation expectations, static Treasury yields and concerns over the resurgence of coronavirus cases in some countries. Holdings in exchange-traded funds backed by the precious metal have resumed an uptrend. On Friday, it edged lower as the dollar strengthened slightly.
“Higher US inflation and lower government bonds yields have lifted gold back to $1,870/oz,” UBS AG analysts including Wayne Gordon wrote in a note. “Still, we expect fading inflation surprises, higher US government bond yields, rising vaccination pace to reduce uncertainty and the US dollar to peak.”
The bank kept it’s end of year forecast for gold unchanged at $1,600 an ounce.
Spot gold slipped 0.1% to $1,876.16 an ounce by 9:03am in London. Prices climbed to $1,890.13 on Wednesday, the highest since Jan. 8, and are up 1.8% this week. Silver, palladium fell and platinum rose. The Bloomberg Dollar Spot Index edged higher after dropping 0.4% on Thursday.
Bullion may have also been supported after the extreme volatility in cryptocurrencies this week. Bitcoin, which is often touted as a replacement for gold due to its inherently limited supply, has fallen 24% this week.
Read more:
- SARB keeps repo rate unchanged; interest rate bias to the upside
- Naspers, Prosus shares rise 3% after Tencent gains 25% in quarterly revenue
- SA April inflation tops 4.4% but expect unchanged rates for extended period – Lings
