Gold set for weekly gain as inflation risks boost appeal

GOLD was set to gain for a second week as inflation and geopolitical risks lifted its safe-haven appeal but it slipped on Friday amid a broader decline in commodities, while palladium was on course for its best week since November 2020.

Spot gold was down 0.4% at $1,831.60 per ounce as of 13:43 ET (1843 GMT). US gold futures settled down 0.6% at $1,831.80.

Silver fell 0.6% to $24.28, but was set for its best week since early May 2021, up about 5.8%.

Market focus is now on the US Federal Reserve’s meeting on Jan. 25-26, and economists polled by Reuters expect the central bank to tighten policy at a much faster pace than thought a month ago to tame persistently high inflation.

The upside momentum of gold could be difficult to maintain ahead of an expected rate hike, which reduces the appeal of holding non-interest bearing bullion, Standard Chartered analyst Suki Cooper wrote in a note, forecasting prices to average $1,783 per ounce in 2022.

Gold has risen about 0.8% this week, as investors sought cover from worries about a possible extension of US sanctions or new EU measures if Russia attacks Ukraine.

Helped in part by a possible supply hit, as Russia is a major producer, palladium rose 2.2% to $2,105.18 per ounce and has rallied about 12.1% this week. Platinum, which fell 0.5% to $1,033.86, was set for its best week since last June.

Potentially boosting autocatalyst demand for palladium and platinum, “passenger car output data suggest that auto production may have passed the trough at the tail end of 2021,” Capital Economics wrote in a note.

“Although, with investment in new semiconductor output taking years to bear fruit and the large backlog of orders that has built up, it is highly uncertain when auto output will stage a full recovery.” —