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Gold faces first weekly decline in three as US dollar rallies

Gold prices were on course for a first weekly decline in three as elevated Treasury yields and a firm US dollar dented safe-haven bullion’s appeal even as the metal steadied on the day.

FUNDAMENTALS

Spot gold was flat at $1,726.96 per ounce by 0126 GMT on Friday. US gold futures were steady at $1,725.50 per ounce. The metal hit a one-week low of $1,721.46 in the previous session.

For the week, the metal has lost over 1% as the US dollar climbed against a basket of major currencies, leaping over a four-month high on Thursday.

US Treasury yields also jumped after the Treasury Department saw tepid interest for an auction of seven-year notes.

Higher returns on Treasury bonds generally increase the opportunity cost of holding non-yielding bullion, while a strong dollar makes it expensive for non-US buyers.

Another bond market sell-off is likely in the next three months following the recent rout in financial markets, according to analysts polled by Reuters.

Countries in Europe are re-enforcing COVID-19 restrictions as Germany, Europe’s largest economy, saw the highest surge in coronavirus cases since January, further raising doubts about the pace of economic recovery.

Gold is often considered as a safe-haven investment at times of political andd economic uncertainties.

Asian markets are set to open higher on Friday after US equities rose as investors weighed the outlook for economic growth and inflation and welcomed progress on vaccination rollouts.

The number of Americans filing new claims for unemployment benefits dropped to a one-year low last week.

Silver rose 0.1% to $25.05, holding above an over two-month low of $24.39 per ounce hit on Thursday.

Palladium rose 0.2% to $2,614.51 and platinum fell 0.1% to $1,146.11.

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