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Gold futures on Friday were headed solidly higher but were set for a weekly decline of at least 3%, in a week in which appetite for bullion was tested by growing prospects for coronavirus remedies and vaccines.
On Friday, weakness in the U.S. dollar and a steady retrenchment in bond yields has helped to encourage investors to dip back into precious metals, which don’t offer a coupon and are priced in dollars.
Metals dealers make the bullish case for gold that the resurgence of COVID-19 in many parts of the world continues to serve as a major underpinning for bullion buying. Central bankers also have expressed caution about becoming too hopeful about promising coronavirus remedies, including those from a partnership of Pfizer PFE, -2.46% and BioNTech BNTX, -7.14% which announced Monday, as hospitalizations and infections take a new deadly path higher.
“It’s just too soon to assess with any confidence the implications of the news for the path of the economy, especially in the near term,” said Federal Reserve Chairman Jerome Powell at a panel discussion hosted by the European Central Bank on Thursday.
December gold GCZ20, +1.05% climbed $16.70, or 0.9%, to reach $1,890 an ounce, after gaining 0.6% on Thursday. The yellow metal, however, is on track for a 3.3% weekly decline, based on the most-active contract, FactSet data show.
Gold prices retained their gains after a reading of producer prices showed a rise in October of 0.3%, with the core producer prices, excluding volatile food and energy prices, up 0.2%. The annual pace of PPI rose to 0.5% from 0.4%.
Silver futures for December delivery SIZ20, +1.99% SI00, +1.99%, meanwhile, added 52 cents, or 2%, to trade at $24.84 an ounce, following a 0.2% gain for gold’s sister metal. Silver is on track for a weekly loss of 3.5%.
At last check, the dollar was down by about 0.1% at 92.90, as measured by the ICE U.S. Dollar Index DXY, -0.14%, while the 10-year Treasury note yield TMUBMUSD10Y, 0.884% was at 0.88%, 10 basis points lower than its peak this week at around 0.98%. Bond prices rise as yields fall.
Friday morning, New York Fed President John Williams on Friday said that bond yields have moved higher this week as financial markets due to reports on the vaccine candidates for COVID-19 and not about worries about a spike in inflation.
He said economic indicators point to a positive trajectory for business activity, but note that the very large rise in COVID-19 cases in the U.S. recently “puts a question mark on the ability of the economy to weather this period.”
Uncertainty about the economic outlook has kept gold and silver in play, commodity experts have said.
“Central bankers generally expect their gold holdings to increase over the next year. General public investor demand for gold has been robust this year as the investing public still sees bullion as a safe-haven asset, wrote researchers from Kitcom.com, citing a survey Central Banking and Invesco.
