Gold makes weekly gain despite late setback

Gold prices recorded their first weekly gain in three weeks despite falling more than 1% last Friday, weighed down by a jump in US Treasury yields and a rebound in the dollar.

The afternoon fixing on Friday in London was $1,741.20 an ounce, compared with $1,726.05 a week earlier. Thai selling prices were quoted at 25,950 baht per baht-weight (15.2 grammes).

“While overall, the gold market is bullish short-term, with expectations of a break higher through $1,760 to $1,765 an ounce, caution about fresh 10- and 30-year (Treasury) auctions and the [US inflation] report next week are keeping yields supported, keeping gold’s advance in check,” said Tai Wong, head of base and precious metals derivatives trading at BMO.

“Yields are driving most markets at the moment, directly affecting the dollar and stocks, and all three matter to gold with varying impact.”

US producer prices increased more than expected in March, resulting in the largest annual gain in nine years, fitting with expectations for higher inflation as the economy reopens.

“This type of potentially inflationary environment is generally viewed as supportive for gold,” said David Meger, director of metals trading at High Ridge Futures.

Adding to gold’s safe-haven appeal, Fed chairman Jerome Powell signalled the central bank is nowhere near reducing its economic support, while warning that an uptick in Covid-19 cases could slow the economic recovcery.

“Gold’s retreat from last year’s peak is a ‘mini-correction’ in a longer bull market,” said Davis Hall, head of capital markets in Asia at Indosuez wealth management.

Physical gold demand in India stalled after local prices rebounded from a one-year trough and coronavirus restrictions were imposed to deal with a surge in new cases.

Local gold futures were trading at around 46,600 rupees ($624) per 10 grammes after falling to 43,320 rupees a week earlier, the lowest since April 2020.