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Gold futures were trading lower Friday morning, headed for a second straight decline, but that belies the weekly updraft that has taken bullion toward the best weekly advance since mid-November.
“Although off its best levels, gold is still up for the second week, suggesting investors have been seeking protection against surging inflation and as excessive risk taking in equities and crypto came to an end,” said Fawad Razaqzada, market analyst at ThinkMarkets, in a daily note.
February gold
GC00,
GCG22,
was trading $4.80, or 0.3%, lower on Friday, after shedding 0.1% on Thursday. Still, the precious metal was looking at a weekly advance of 1.2%, which would mark its steepest weekly gain since Nov. 12, FactSet data show.
Precious metals such as gold have enjoyed haven demand amid a global selloff in equities and increased anxieties about the market outlook set against rising inflation and a Federal Reserve that has expressed its intent on pulling back on easy-money policies.
That uncertain backdrop has benefited gold in the near-term but the prospect of higher rates and Treasury yields eventually rising, will likely pose a headwind for gold, strategists have said.
The rate-setting Federal Open Market Committee next gathers on Jan. 25-26 and is expected to set the stage for a series of interest-rate increases.
Still, Razaqzada argues that much of that bearish dynamic could already be priced into gold futures, which had previously struggled to reach and sustain a psychological and technical level at $1,800 until recently.
“I think the markets have priced in a hawkish Fed meeting already and gold has been able to shrug off the recent strength in yields. So, a potential breakout from the current ranges should not be too surprising,” the ThinkMarkets analyst wrote.
“It would help if the Fed were to talk down the prospects of an even faster tightening cycle,” he said.
Meanwhile, silver for March delivery SIH22 was down 19 cents, or 0.8%, following a 2% rise, which had marked its highest value since Nov. 19. Silver is looking at its sharpest weekly advance, up 7.2%, since December of 2020.
