Gold prices turned up on Friday, as the dollar fell and US Treasury yields came off their highs after Donald Trump was sworn in as US president. Trump pledged to end the "American carnage" of social and economic woes in an inaugural address that was a populist and nationalist rallying cry, prompting investor concern about protectionist trade policies.
"I think some of the populist issue themes that he's touched on are supportive of gold," said James Steel, chief metals analyst for HSBC Securities in New York. Spot gold was up 0.5 percent at $1,211.30 an ounce by 3:04 p.m. EST (2004 GMT), while US gold futures settled up 0.3 percent at $1,204.90 per ounce.
Gold shrugged off better-than-expected US jobs, housing and factory data that reinforced the view that the US economy is sufficiently robust to warrant interest rate rises. Philadelphia Federal Reserve President Patrick Harker said on Friday he expected three interest rate increases in 2017 if the labour market improves further and inflation moves to the Federal Reserve's 2 percent goal.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion while boosting the dollar, in which it is priced. "Gold has dropped back from quite a significant technical level around $1,220, a critical retracement of last year's high to low move. I would say from here the risks are skewed to the downside in the short term," Mitsubishi's Butler said. In other precious metals, palladium rallied as much as 5.2 percent to $792.90 an ounce, the highest since May 2015.
"Some of the good feeling generated by expectations for expansionist economic policies are good for the PGMs," Steel said, referring to the platinum group metals. "Palladium is more sensitive because the fundamentals are a lot tighter. A lot of this gets translated into auto demand." Silver rose 0.5 percent at $17.09, while platinum gained 2.2 percent at $978.90. The decline in diesel vehicles in Europe is a threat to platinum prices, Macquarie said in a note.
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