Gold set to snap 5-week losing streak on softer dollar, yields

Gold headed for its first weekly gain in six on Friday as a pullback in U.S. Treasury yields and the dollar’s decline bolstered non-yielding bullion’s safe-haven appeal as economic risks persisted.

Spot gold was up 0.29% to $1,723.34 per ounce and on track for a more than 1% weekly rise, following a strong rebound from more than a one-year low of $1,680.25 on Thursday.

U.S. gold futures settled 0.8% higher at $1,727.4.

The rebound was helped by a retreat in U.S. 10-year Treasury yields.

Boosting gold’s allure for overseas buyers, the dollar index, also a rival safe haven, headed for its first weekly fall in four weeks as disappointing U.S. data dampened expectations of a large 100-basis-point (bps) interest rate hike by the Federal Reserve at its July 26-27 policy meeting.

The lower dollar, declining growth stocks and the dip in yields are all helping gold, said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

While the Fed meeting is likely to be a “high-volatility event” for gold, there may not be many steep hikes after the one next week, Streible added.

Rising U.S. interest rates increase the opportunity cost of holding non-yielding bullion.

“Assuming the Fed hikes by 75 bps in July, we believe the bulk of the near-term downside risk has been priced in; but the longer-term trend is still to the downside,” Standard Chartered analyst Suki Cooper said in a note.

But gold could also find support from a price-responsive physical market and if recession risks deepen, Cooper added.

In the physical markets, demand picked up in some Asian hubs this week as softer prices drew buyers, allowing dealers in India to narrow discounts.

Spot silver tumbled 1.65% at $18.52 per ounce, bound for its eight straight weekly decline. Platinum slipped 0.27% to $869.4.

Palladium rose 5.69% to $2,000.35, en route for a roughly 9% gain for the week.