Gold Gains, Set for Weekly Rise as US Yields Fall

  • Gold Heads For Fourth Straight Weekly Gain
  • US Treasury yields plunge

Aug 12 (Reuters) – Gold prices rose on Friday, helped by a drop in U.S. Treasury yields and putting the metal on course for a fourth consecutive week of gains, as investors took stock of recent US inflation data.

Spot gold rose 0.5% to $1,798.86 an ounce at 1800 GMT and was heading for a weekly rise of more than 1%. US gold futures also rose 0.5% to $1,815.5.

“Currently the gold market is experiencing some short hedging and is supported by lower yields,” said Bart Melek, head of commodity strategy at TD Securities.

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U.S. Treasury yields fell after a volatile week as investors weighed whether an apparent slowing in inflation’s rise could reduce the speed of Federal Reserve interest rate hikes.

Data released earlier this week indicated that US inflation cooled, following which market participants dampened expectations of an aggressive rate hike by the Fed.

However, recent comments from the Fed continue to be hawkish and have kept the metal from rising above the $1,800 level.

“Gold’s rally after weaker CPI numbers has come to a halt as the market believes inflation will continue to be a problem. Fed speakers have also suggested they won’t couldn’t afford to give up the fight against inflation,” Melek added.

Gold tends to do well in a low interest rate environment because it earns no interest.

“Rising risk appetite, exemplified by surging equities and bond yields…has so far prevented the yellow metal from making a decisive challenge at key resistance above $1,800,” Ole said. Hansen, analyst at Saxo Bank.

Meanwhile, high domestic prices have limited physical demand for gold in India this week, while uncertainty surrounding developments related to Taiwan prompted bullion importers in China to suspend large purchases.

Spot silver rose around 2% to $20.70 an ounce, platinum rose 0.3% to $958.57, while palladium fell 1.8% to 2,235 $.09.

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Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Shounak Dasgupta

Our standards: The Thomson Reuters Trust Principles.

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