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Metals Stocks: Gold prices end higher, notch best weekly gain of the year

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Gold futures ended higher on Friday for a second straight day, with bullion posting the sharpest weekly percentage rise of the year.

The precious metal benefitted from benchmark bond yields receding for the week, a decline in the U.S. dollar
DXY,
-0.14%
,
and a pullback in bitcoin
BTCUSD,
-2.89%
,
one of the assets seen competing against safe haven gold.

“Gold continues to derive strength from falling Treasury yields, a weaker dollar, and worsening coronavirus conditions in Europe,” said Lukman Otunuga, senior research analyst at FXTM.

“Should Treasury yields continue to retreat and the dollar extends losses in the week ahead, this could push gold prices towards the $1,800 level,” he told MarketWatch.

Meanwhile, “the rising tensions between the United States and Russia may be the icing on the cake for gold bulls,” said Otunuga. President Joe Biden on Thursday expelled some Russian diplomats and imposing new sanctions, partly in retaliation for Russia’s interference in last year’s presidential election and Russia responded Friday by expelling American diplomats.

June gold
GCM21,
+0.66%

GC00,
+0.66%

rose $13.40, or 0.8%, to settle at $1,780.20 an ounce on Comex, following a 1.8% gain on Thursday.

For the week, gold saw a weekly rise of about 2%, for its biggest weekly advance since the period ended Dec. 18, 2020, according to Dow Jones Market Data.

The 10-year Treasury note
BX:TMUBMUSD10Y
was yielding 1.56%, below its recent range between 1.60% and 1.75%. A fall in government debt yields can boost appetite for precious metals which don’t earn a coupon.

The dollar was down 0.1% at 91.561, as gauged by the ICE U.S. Dollar Index
DXY,
-0.14%
,
a measure of the buck against a half-dozen currencies. The dollar is down 0.7% this week and off 1.8% in April so far. A weaker dollar can make dollar-pegged assets more appealing to overseas buyers.

Economic data from the two largest economies in the world also remain “highly encouraging and may boost global sentiment,” Otunuga said.

It has also been “a solid start to earnings season and if this remains a key theme, risk-on could become the name of the game,” he said. That suggests potential for a rise in U.S. benchmark stock indexes, which could lure some investors away from gold.

Although the trend for gold is turning bullish on the daily charts, “gold bears could still make an appearance,” Otunuga said.

In related news, China has given domestic and international banks permission to import large amounts of gold into the country, according to Reuters, which cited five sources familiar with the matter.

That follows a report from Reuters citing the Xinhua news agency on Monday that said Chinese Premier Li Keqiang wanted to strengthen control of raw materials to ease the cost pressure of companies. That put pressure on Chinese steel futures earlier this week.

Read: Lumber and steel markets look to Biden’s infrastructure plan for their next big boost

Among other Comex metals, palladium was a standout, with most-active futures prices notching another record settlement.

Read: Palladium prices hit a record as rally extends into a 6th straight year

June palladium
PAM21,
+1.59%

climbed 1.3% at $2,774.70 an ounce, topping Thursday’s record of $2,739.40. Prices were up over 5% for the week.

See: Why rhodium has stretched a rally that saw prices for the metal nearly triple last year

Production challenges at the world’s largest palladium producer Norilsk Nickel
NILSY,
+2.72%

and steady production in South Africa have kept supplies tight, R. Michael Jones, chief executive officer of Platinum Group Metals Ltd.
PLG,
+6.31%
.

July platinum
PLN21,
+0.62%

also rose 0.7% at $1,208.70 an ounce, down less than $1 from the week-ago finish. May silver
SIK21,
+0.47%

tacked on 0.5% to nearly $26.11 an ounce, while May copper
HGK21,
-1.16%

fell 1.2% to $4.17 a pound — but both silver and copper ended the week over 3% higher.

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