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Markets

Gold retreats over 1pc, but still on course for weekly gain

  • Investors eye US PPI data later in the day.
  • Fed's Powell sees inflation unlikely.
  • Palladium faces biggest weekly decline in six weeks.
09 Apr, 2021

Gold fell more than 1% on Friday, weighed down by a rising dollar and US Treasury yields, but bullion was still on course to for its first weekly gain in three.

Spot gold fell 1% to $1,738.43 per ounce by 1243 GMT, having hit its highest since March 1 at $1,758.45 on Thursday. For the week, however, prices were up 0.5%.

US gold futures slipped 1.1% to $1,738.50.

"Gold's had a fairly decent week on the back of weaker US yields and the dollar," but they are slightly up now and that's weighing on prices, said CMC Markets UK's chief market analyst, Michael Hewson.

The dollar and benchmark US yields have rebounded from two-week lows, making gold less appealing.

Data out of China showed factory-gate prices rose at their fastest annual pace since July 2018 in March, while the producer price index (PPI) rose 4.4%. US PPI data is due later in the day.

"If we get a similarly strong number (in US PPI), that could reawaken the inflation genie and put upward pressure on US yields, and that in turn will hurt gold," Hewson said.

However, Federal Reserve Chair Jerome Powell on Thursday reiterated that higher inflation numbers that would require the Fed to react with rate hikes were unlikely.

"Gold's retreat from last year's peak is a 'mini-correction' in a longer bull market," said Davis Hall, head of capital markets in Asia at Indosuez wealth management.

"A lot of that speculative froth has been withdrawn as bitcoin picked up the baton... (but) as long as real yields remain flat to negative, gold has that underlying long-term support."

Silver slipped 1.4% to $25.07, while platinum shed 2.5% to $1,198.81. Palladium rose 0.3% to $2,632.36, but was on track for its biggest weekly fall since the week ending Feb. 26.

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