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Metals Stocks: Gold edges higher, on track for a second weekly gain

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Gold futures edged higher Friday as U.S. Treasury yields steadied after a spike in the previous session and with the yellow metal underpinned by inflation worries and jitters about this week’s slump in equities.

“Gold is finding comfort above $1,730 thanks to a dovish Federal Reserve and U.S.-China tensions,” said Lukman Otunuga, senior research analyst at FXTM. “The precious metal remains supported by the cautious market mood while progress on [President Joe] Biden’s stimulus package continues to cushion downside losses.”

“Given how the Federal Reserve has reiterated its stance that interest rates are not going anywhere anytime soon, this bodes well for zero-yielding gold,” he told MarketWatch. However, expectations around Treasury yields rising could “limit the upside potential, especially when factoring how 10-year Treasury yields have posted a new high since January 2020.”

Gold for April delivery
GCJ21,
+0.06%

edged up by 60 cents, or 0.03%, to $1,733.10 an ounce on Comex, on track for a 0.8% weekly rise, which would be the second in a row. May silver
SIK21,
-0.54%

was off 18 cents, or 0.7%, at $26.17 an ounce, heading for a 1% weekly rise.

Also read: China pollution reduction efforts look set to disrupt iron ore’s rally

Treasury yields steadied Friday, with the rate on the 10-year note
TMUBMUSD10Y,
1.731%

around 1.717% after spiking to a 14-month high in the previous session. Bond yields jumped on Thursday after the Fed reinforced a dovish tone to its monetary policy at its meeting on Wednesday but expressed little concern about any tightening of financial conditions. Higher yields can be a negative for gold because they raise the opportunity cost of holding non-yielding assets.

“The tug of war continues between rising bond yields (which are weighing on gold) and the nervousness on the stock markets (which is tending to lend support),” wrote analysts at Commerzbank, in a note.

Meanwhile, some analysts argue that, despite higher bond yields, gold still has some attraction as an inflation hedge, given the $1.9 trillion fiscal stimulus enacted by the Biden administration this month along with the Fed’s easy money policies which are expected to see U.S. economic growth surge this year.

Other metals traded on Comex moved lower Friday, with May copper
HGK21,
-0.39%

down 0.9% at $4.07 a pound, headed for a weekly loss of 1.6%. April platinum
PLJ21,
-2.41%

lost 3.3% to $1,177.80 an ounce, trading 1.8% lower for the week.

June palladium
PAM21,
-1.68%

fell nearly 1.9% to $2,613.50 an ounce. Prices were poised to gain more than 10% for the week. They settled Thursday at the highest for a most active contract since February of last year on concerns over tighter supplies.

Need to Know: The bond market is ‘useless’ predicting inflation, and stocks look even more expensive than they appear, strategist says

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