Gold rebounds as the greenback weakens on Italian political tensions

NEW YORK/LONDON — Gold prices rebounded on Friday, as the US dollar eased after Italian political tension sparked a selloff in the country’s bond markets and investors sought a safe haven in bullion.

Spot gold gained 0.20% at $1,292.12 per ounce (/oz) by 1:33 p.m. EDT (1733 GMT), after hitting its lowest since Dec. 27 in the previous session at $1,285.41.

The metal was headed for its biggest weekly decline since early December, down nearly two percent versus the preceding week.

US gold futures for June delivery settled up $1.90, or 0.20%, at $1,291.30/oz.

“Gold got stronger off Italian geopolitics and the sell- off in Italian bond markets,” said Josh Graves, senior commodities strategist at RJO Futures.

The demands of populist parties likely to form Italy’s next government, which promised to ramp up spending, caused Italian investors to flee bond markets and purchase gold.

“A debt crisis in Italy would have a far bigger impact than one in Greece. Gold would profit as a result,” Commerzbank analysts said in a note.

This caused more volatility in global equities, which also provided gold support, Mr. Graves added.

Earlier, the sentiment index in gold was indicating it was strongly oversold while the dollar was heavily overbought as US inflation measures were rising, said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.

Thursday data showed a tightening US labor market and midAtlantic factory activity picking up, bolstering expectations the Federal Reserve will raise interest rates next month.

“We think there is room for a strong rally into the summer and we have a gold target of $1,430 by August,” Mr. Torlizzi said.

The dollar index earlier rose to a fresh five-month peak as the benchmark US Treasury yield hit the highest in nearly seven years. A stronger greenback makes dollar- denominated gold more expensive for users of other currencies, while higher US yields dampen the appeal of non-yielding bullion.

Spot gold is still expected to hit $1,302/oz as it has stabilized around a $1,287 support, Reuters technical analyst Wang Tao said.

Spot silver fell 0.40% to $885.40/ oz, on track to shed slightly more than one percent for the week. Platinum dropped 0.40% to $885.40/oz after hitting a five-month low of $876.50. Platinum was set to fall around 4% on the week, the biggest weekly loss since early December. Palladium fell 1.2% to $966.30/oz, earlier hitting a two-week low at $960.22 and headed for a nearly 3% weekly loss. —