Gold set for best weekly gain since Nov as U.S. dollar, yields ease

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Jan 14 (Reuters) – Gold prices were set for their biggest weekly rise since November on Friday, bolstered by a weaker dollar and lower Treasury yields, while traders awaited more economic data for clarity about the Federal Reserve’s tapering timeline.

Spot gold rose 0.2% to $1,826.51 per ounce by 0624 GMT, and has added about 1.7% so far this week. U.S. gold futures were up 0.3% at $1,826.80.

“Weakness in the U.S. dollar is supporting gold, which is likely to continue rising today,” said Kunal Shah, head of research at Nirmal Bang Commodities.

With the resurgence in COVID-19 cases, uncertainty over the impact of the upcoming withdrawal of monetary stimulus in major economies is also helping gold, Shah said.

The dollar was headed for its largest weekly fall in eight months, making the greenback-priced gold cheaper for buyers holding foreign currencies. Benchmark U.S. 10-year Treasury yields face their first weekly dip in four.

Fed Governor Lael Brainard on Thursday became the latest and most senior U.S. central banker to signal that the Fed is likely to start raising interest rates in March.

Gold is considered an inflationary hedge, but the metal is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion.

Investors await U.S. economic data including retail sales and industrial production due later in the day, after the December inflation print came in line with expectations.

“Gold had been buoyant this week on expectations the Fed will not have to hike interest rates too aggressively,” Phillip Futures analyst Avtar Sandu said in a note.

Spot silver rose 0.4% to $23.16 an ounce, and was en route to its best week in two months.

Platinum climbed 0.9% to $978.32 and was set to gain this week, while palladium fell 0.8% to $1,871.87 and was poised for a weekly drop.

(Reporting by Asha Sistla and Seher Dareen in Bengaluru; Editing by Rashmi Aich and Subhranshu Sahu)

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