Gold gains, set for weekly rise as U.S. yields drop

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Gold prices drifted higher on Friday

helped by a drop in U.S. Treasury yields and setting the metal

on path for a fourth straight week of gains, as investors took

stock of the recent inflation data out of the United States.

Spot gold rose 0.5% to $1,798.86 per ounce by 1800

GMT and was headed for a more than 1% weekly rise. U.S. gold

futures also settled up 0.5% at $1,815.5.

“Currently the gold market is seeing some short-covering and

is supported by lower yields,” said Bart Melek, head of

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commodity strategy at TD Securities.

U.S. Treasury yields dipped after a volatile week as

investors evaluated whether an apparent slowdown in inflation

increases could reduce the speed of Federal Reserve interest

rate hikes.

Data released earlier this week indicated that inflation in

the U.S. has cooled down, following which market participants

toned down expectations of an aggressive rate hike by the Fed.

However, recent Fed commentary continues to be hawkish and

have stopped the metal from breaking above the $1,800 level.

“Gold’s rally, after cooler CPI numbers, stopped in its

tracks as the market believes inflation will continue to be a

problem. Fed speakers have also suggested they can’t afford to

relinquish the fight against inflation,” Melek added.

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Gold tends to do well in a low-interest environment as it

yields no interest.

“Rising risk appetite as seen through surging stocks and

bond yields … have so far prevented the yellow metal from

making a decisive challenge at key resistance above $1,800,”

Saxo Bank analyst Ole Hansen said.

Meanwhile, high domestic prices restrained physical gold

demand in India this week, while uncertainty surrounding

Taiwan-related developments prompted bullion importers in China

to hold off on big purchases.

Spot silver rose around 2% to $20.70 per ounce,

platinum was up 0.3% at $958.57, while palladium

fell 1.8% to $2,235.09.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by

Shounak Dasgupta)