Gold set for third weekly gain as US bond yields, dollar tumble

[BENGALURU] Gold prices on Friday (Oct 29) were set to mark a third straight weekly gain as a retreat in US bond yields and a tepid dollar lifted bullion's safe-haven appeal.

Spot gold was steady at US$1,797.82 per ounce, as of 1 am GMT, but gained 0.3 per cent so far this week. US gold futures dropped 0.2 per cent to US$1,799.40 per ounce.

Benchmark 10-year US Treasury yields were set for their biggest weekly decline since early September, reducing the opportunity cost of holding non-yielding bullion.

The US dollar was also headed for a third weekly decline. A weaker greenback makes gold more attractive to buyers holding other currencies.

European Central Bank President Christine Lagarde acknowledged higher inflation on Thursday (Oct 28), but pushed back against market bets that price pressures would trigger an interest rate hike as soon as next year.

Market participants now await the US Federal Reserve policy meeting due on Nov 3.

Investors are gauging what a furious flattening of the US yield curve suggests about expectations for growth and how aggressively the US Federal Reserve may tighten monetary policy in the face of surging inflation.

The US economy grew at its slowest pace in more than a year in the third quarter, data on Thursday showed.

Analysts have trimmed their gold price forecasts for the rest of this year and next, a Reuters poll showed on Thursday.

Gold is traditionally seen as an inflation hedge. However, reduced stimulus and interest rate hikes would push government bond yields up, translating into a higher opportunity cost for holding gold, which pays no interest.

In another poll, forecasts for palladium and platinum prices were also lowered with a chip shortage forcing auto makers to cut production of vehicles containing the metals.

Spot silver fell 0.3 per cent to US$24.02 per ounce and was set for its worst week since mid-September.

Platinum dipped 0.1 per cent to US$1,018.24 per ounce, while palladium rose 0.2 per cent to US$1,992.17.

REUTERS