Gold heads for best week in five months on softer US dollar, yields

[BENGALURU] Gold prices on Friday hovered near a 2.5 month high and were on track for their best week in five months, aided by a weaker US dollar and a pullback in Treasury yields as investors cautiously await US non-farm payrolls report due later in the day.

Spot gold was steady at US$1,815.88 per ounce by 0246 GMT, after hitting its highest since Feb 16 at US$1,817.90 in the previous session. Bullion up more than 2.5 per cent so far this week.

US gold futures were little changed at US$1,816.40.

"The weaker dollar and US Treasury yields dropping below 1.6 per cent has helped gold prices to go above US$1,800," Brian Lan, managing director at dealer GoldSilver Central said.

"The US jobs data is very important point... if data comes out really good, we can see people being more positive on the economy and it might lead to Federal Reserve increasing the interest rates earlier than expected, which will impact gold."

The dollar index slipped to a one-week low against its rival, making gold less expensive for other currency holders, while benchmark US 10-year Treasury yields hovered close to a two-week low.

Lower bond yields generally reduce the opportunity cost of holding non-interest bearing gold.

Market participants await US monthly jobs report due at 8.30am EST to gauge the Fed's strategy on monetary support going forward. Economists expect 978,000 new US jobs for April, according to a Reuters poll.

Data on Thursday showed weekly US jobless claims dropped to a 13-month low.

The economic outlook is brightening, but more improvements are needed before the Fed will start to scale back monetary support, Cleveland Fed Bank president Loretta Mester said.

Elsewhere, palladium rose 0.5 per cent to US$2,960.06 per ounce, after hitting an all-time high of US$3,017.18 earlier this week.

Silver gained 0.3 per cent to US$27.26 per ounce and was up more than 5 per cent this week. Platinum was steady at US$1,252.24.

REUTERS