Gold rides weakened dollar

NEW YORK/LONDON — Gold was set for its biggest weekly gain in two months on Friday as a surging euro dragged down the US dollar to its weakest since June 2016, making bullion cheaper for holders of other currencies.

Bond yields fell after European Central Bank (ECB) President Mario Draghi said on Thursday the ECB was in no rush to scale back its asset purchase program. The greenback retreated against a basket of major currencies, with the dollar index hitting a more than oneyear low in afternoon dealings.

Central banks have “taken a more dovish tone and the dollar is working in gold’s favor,” said Josh Graves, a senior market strategist with RJO Futures in Chicago.

Gold is highly sensitive to rising interest rates. Lower yields help gold prices by reducing the opportunity cost of holding nonyielding bullion.

Spot gold was up 0.87% at $1,255.0601 an ounce by 2:21 p.m. EDT (1821 GMT). Prices hit $1,255, the highest since June 26, and were on track for their largest weekly gain since May.

US gold futures for August delivery settled up $9.40, or 0.75%, at $1,254.90 per ounce and finished the week up 2.20%.

While gold was benefiting from the dollar’s weakness against the euro and the move in yields, its gains would be limited by expected interest rate rises by the US Federal Reserve and it would remain in a $1,200-$1,250 range, ABN AMRO analyst Georgette Boele said.

The Fed’s rate-setting committee is due to meet on July 25 and 26.

Falling bond yields and a weakening dollar have helped gold rise 3.90% from a low of $1,204.45 on July 10, but this was driven by short-covering and not physical demand, Julius Baer analyst Carsten Menke said.

In other precious metals, silver was up 1.18% at $16.482 an ounce after touching $16.509, the highest since July 3. Silver was up 3.30% this week, on track for the largest weekly gain since January. Platinum rose 0.87% to $934.35 an ounce and on track to end the week up 2.10%. Palladium was up 0.20% at $844.22, but set for a weekly fall of 1.60%.