Gold set for third weekly gain

DAR ES SALAAM – GOLD held firm near a five-week high on Friday and was set for a third consecutive week of gains, as US inflation data released earlier this week raised the expectation that the Federal Reserve might cut interest rates further this year.

Spot gold was flat at US$2,715.09/oz by Sunday morning. Bullion has gained about 1 per cent so far this week. US gold futures slipped 0.1 per cent to $2,746.90. Last Thursday, gold rose more than 1.0 per cent to hit its highest since December 12 after a slew of US economic data pressured treasury yields further.

Gold was supported by weakness in the dollar after inflation data this week sided with rate-cut expectations, said Ajay Kedia, director at Kedia Commodities in Mumbai.

“We see support at $2,694 and a breach of the $2,720 level will take prices towards $2,770 on the higher side,” Kedia said. Fed governor Christopher Waller said three or four rate cuts are still possible this year if US economic data weakens further.

The expectation for further Fed rate cuts grew after the release of December inflation data on Wednesday and Waller’s remarks on Thursday. Investor expectation has shifted towards a view of two cuts with a good chance of the first one coming as early as May.

“Increased uncertainty due to the incoming administration and its potential actions are influencing gold as an instrument to trade short-term volatility,” said Michael Langford, chief investment officer at Scorpion Minerals.

With president-elect Donald Trump set to begin his second term next week, the focus remains on his policies that analysts expect would fuel inflation. Nonyielding gold is often used as an inflation hedge.

Spot silver rose 0.1 per cent to $30.82/oz, climbing more than 1 per cent this week in what would be its third consecutive weekly gain. Palladium eased 0.1 per cent to $939.53, losing about 0.9 per cent this week.

Platinum added 0.5 per cent to $936.90 but was down about 3 per cent in what could be its worst week since November.