(Bloomberg) — Gold headed for a third weekly advance as fears that coronavirus variants may endanger the economic recovery saw investors opt for havens.
Bullion is winning back investors after a bleak June, helped by a sharp decline in Treasury yields which burnish the appeal of the non-interest bearing metal. Renewed virus fears around the world have taken the edge off the so-called reflation trade, causing global stocks to plummet, though a partial rebound took place on Friday.
The risks to the recovery were underscored this week by Federal Reserve minutes that highlighted continued uncertainties, and on Thursday by a rise in U.S. jobless claims. China’s surprise hint that it could unleash more liquidity to the economy also added to the sense that headwinds to a global recovery remain strong.
“Commodities came under pressure as policy makers around the world flagged risk to their economies from rising cases of Covid-19 variants,” Australia & New Zealand Banking Group Ltd. said in a note. “Demand for safe haven assets rose following a lift in U.S. initial jobless claims.”
It’s a turnaround from last month, when bullion dropped the most since 2016 after the U.S. central bank pulled forward its forecasts for rate hikes. Any signs it will be forced to continue its monetary stimulus will be welcomed by gold, as will weak data that shows the economic rebound is stuttering.
Next week investors will keenly watch U.S. CPI data due Tuesday for signs prices are rising despite sluggish growth. Gold performs at its best when interest rates are kept low while inflation expectations rise, which causes real bond yields to decline.
Gold was little changed at $1,802.86 an ounce by 10:00 a.m. in London, and is set to gain 0.9% so far this week. Silver was also steady, while palladium fell and platinum gained.
More stories like this are available on bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2021 Bloomberg L.P.