Gold prices rose sharply on Friday, amid a marked drop in US Treasury yields.
Prices rose as high as $2,040 an ounce in late deals Friday, rebounding off a low of $2,016 an ounce seen in the morning session. That compared with around $2,025 an ounce in late deals on Thursday.
The trigger for gold’s sudden gains appeared to be a sharp drop in US Treasury yields on Friday. The yield on 10-year bond notes fell from 4.35% to 4.25% within the day, reversing gains seen on Tuesday and Wednesday.
Falling treasury yields are bullish for gold because they reduce the opportunity cost of holding non-interest-bearing assets like precious metals.
Adding another element to the bullish sentiment, US bank Goldman Sachs on Thursday published a report forecasting that gold prices will rise 6% in the coming 12 months. The bank’s analysts cited an expected continuation of robust central bank purchasing and strong retail demand in emerging markets as key reasons for the forecasted price rise.
Overall, gold’s gains capped a strong week for the yellow metal, taking prices to their highest since February 7. There may also have been an element of position-taking ahead of the weekend, as the current geopolitical climate is rife with upside risks for gold, linked to news flow around the tensions in the Middle East which can temporarily boost demand for safe-haven assets.
Looking ahead, upcoming points of note include a speech by ECB President Christine Lagarde on Monday afternoon and US durable goods orders for January on Tuesday.
Frank’s experience covering the commodities markets spans 22 years, with a particular specialism in metals, carbon and energy markets. He has worked as a senior editor for S&P Global Commodity Insights (formerly Platts) and before this, at ICIS-LOR, a part of Reed Business Information (Reed Elsevier), where he covered the petrochemicals markets from 2003 to 2005.
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