Gold prices surge, set for best week since mid-November. Here's why
Gold prices climbed on Friday, poised for their best week since mid-November, as the dollar weakened after the U.S. Federal Reserve decided to withdraw its pandemic-era stimulus in response to fight to broaden inflationary risks.
Spot gold was up 0.2% at $1,802.87 per ounce, as of 0323 GMT, while U.S. gold futures rose 0.3% to $1,802.60. The metal has risen 1.1% so far in the week, heading for its first weekly gain in five.
The dollar index remained under pressure after hitting a one-week low in the previous session, making greenback-priced bullion cheaper for holders of other currencies. The benchmark 10-year yield dropped 3.8% so far in the week.
"The gold market is benefiting from high inflation, which is outweighing the Fed's hawkish stance. U.S. 10-year real yield moved deeper into negative territory, keeping the investment backdrop supportive," ANZ analysts said in a research note.
"Should negative interest rates stay longer than expected, it should favour investor demand for gold."
Britain became the first G7 economy to hike interest rates since the onset of the pandemic on Thursday, with the U.S. central bank also signalling plans to tighten in 2022 but the European Central Bank only slightly reining in the stimulus.
The Bank of Japan on Friday decided to taper its corporate debt purchases to pre-pandemic levels and scale back some of its emergency funding scheme upon reaching the March 2022 deadline.
Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of holding bullion, which bears no interest.
The U.S. Fed said it would pave the way for three quarter-percentage-point interest rate increases by the end of 2022 as the economy nears full employment and the Fed copes with a surge of inflation.
Silver dipped 0.1% to $22.44 per ounce, platinum was flat at $936.01, and palladium rose 1.2% to $1,750.57.