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Gold heads for third weekly gain on tepid dollar, inflation worries

Gold heads for third weekly gain on tepid dollar, inflation worries

20 May 2021

Gold prices steadied on Friday, and were on track for a third straight weekly gain, as a weaker U.S. and growing inflationary pressure boosted demand for the safe-haven metal.

Spot gold was flat at $1,876.54 per ounce by 0510 GMT, and has risen nearly 1.9 per cent so far this week. U.S. gold futures fell 0.3 per cent to $1,876.90.

“U.S. economic data has given us strong inflation alerts this week, meaning yields and the dollar have fallen, strong supportive factors for gold,” OANDA senior market analyst Jeffrey Halley said.

“Additionally, I believe that upward trading momentum has increased for gold as investors now believe that prices have made a structural low.”

The dollar was pinned near milestone lows against its rivals and headed for a weekly loss, while benchmark 10-year Treasury yields fell.

Recent data showing a rise in prices in the United States and the UK intensified concerns over inflation, lifting gold’s appeal as an inflation hedge.

“Further stimulus are seen in different countries and these in the minds of many will lead to inflation moving forward,” Brian Lan, managing director at dealer GoldSilver Central said.

“On the longer term, we continue to be bullish on gold as the fundamentals that support owning gold have not changed and wouldn’t change for some time, in particular, the low-interest rates environment.”

Indicative of sentiment, holdings of SPDR Gold Trust , the world’s largest gold-backed exchange-traded fund, rose 0.6 per cent to 1,037.09 tonnes on Thursday.

Meanwhile, risk sentiment in wider financial markets remained upbeat, fuelled by hopes around a quick economic recovery.

Data on Thursday showed the number of Americans filing new claims for unemployment benefits dropped further below 500,000 last week.

Elsewhere, palladium fell 0.4 per cent to $2,841.58 per ounce, silver rose 0.1 per cent to $27.76. Platinum gained 0.5 per cent to $1,201.66, but was on track for its second straight weekly fall.