Gold heads for weekly rise as U.S. Treasury yields edge lower

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Gold rose on Friday and was set to post a third straight weekly gain after U.S. President Joe Biden’s proposal to hike capital gains tax weighed on U.S. Treasury yields, while a weaker dollar also bolstered the metal’s appeal.

Spot gold was up 0.2% at $1,786.87 per ounce by 0332 GMT. The metal jumped to its highest since Feb. 25 at $1,797.67 on Thursday, and has added about 0.6% so far this week. U.S. gold futures rose 0.3% to $1,786.90 per ounce.

“The knock-on effect from the tax hike (proposal) is attracting bond investors and the yields have dropped, and this is providing a little bit of lift-off for gold,” said Stephen Innes, chief global market strategist at financial services firm Axi. “The big question now facing gold markets is a decision on how the U.S. Federal Reserve is going to play next week.”

U.S. 10-year Treasury yield ticked lower on news that Biden will roll out a plan to raise taxes for high earners. A subdued dollar also raised gold’s appeal for other currency holders. Underlining a revival in Asian bullion demand, shipments to India leapt to their highest since 2013, driving Swiss gold exports to a 10-month high.

Despite signs of strong pent-up demand for physical gold in India, rising coronavirus cases and renewed lockdown measures are threatening to kill off that revival, ANZ analysts wrote in a note. India recorded the world’s highest daily tally of COVID-19 infections on Thursday.

Palladium rose 0.1% to $2,840.20 per ounce but was off a record $2,891.50 hit on Thursday. Many analysts expect a further run towards $3,000 levels as automakers ramp up purchases of the metal, worsening a supply shortage.

Silver was little changed at $26.16 per ounce but set for a third straight weekly gain.

Platinum rose 0.1% to $1,204.77.