Gold prices set for second weekly gain as dollar, yields slip

(Reuters) - Gold prices edged up on Friday and were headed for a second consecutive weekly gain propped up by a pullback in the dollar and U.S Treasury yields, while fears of aggressive policy tightening by the Federal Reserve subsided.

FILE PHOTO: An Iraqi goldsmith arranges gold at his shop in Najaf, Iraq December 5, 2020. REUTERS/Alaa Al-Marjani

Spot gold gained 0.1% to $1,852.22 per ounce by 2:16 p.m. ET (1816 GMT). It has risen about 0.4% for the week.

U.S. gold futures settled up 0.2% at $1,851.3.

“The Fed is sticking to its point to some extent,” said Daniel Pavilonis, senior market strategist at RJO Futures, adding there is an uncertainty over what happens after the next two interest rate hikes.

“The expectations are reflected in the 10-year yield which has been coming down significantly from its highs.”

Benchmark 10-year note yields were down on the day, after briefly rising on strong spending data, while the dollar was headed for a second consecutive week of declines. [US/][USD/]

Gold is highly sensitive to U.S. interest rates, as rising rate increases the opportunity cost of holding non-yielding bullion.

Minutes of the Fed’s May 3-4 policy meeting released on Wednesday highlighted 50 basis point rate hikes at the June and July meetings.

The minutes showed the Fed grappling with how best to navigate the economy towards lower inflation without causing a recession.

On the equities side, the S&P 500 index was set for its best weekly gain since mid-March as upbeat earnings, strength in consumer spending and signs of inflation peaking eased worries about a sharp slowdown in economic growth. [.N]

“Gold looks now to have found its true level and is likely to oscillate around the $1,840-$1,860 an ounce range until there is a fresh catalyst,” Rupert Rowling, market analyst at Kinesis Money, said in a note.

Spot silver rose 0.2% to $22.04 per ounce, set to post a 1.4% gain for the week.

Palladium gained 2.3% to $2,060.36, up 4.8% for the week so far, its highest since early April.

Platinum was up 0.1% to $950.59.

Reporting by Seher Dareen and Eileen Soreng in Bengaluru; Editing by Krishna Chandra Eluri, Kirsten Donovan and Amy Caren Daniel