Gold Surges on Inflation Fears, Capped by Powell’s ‘Time To Taper’ Remarks

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Gold futures are testing $1,800 and are on track for their best weekly gain since August. The yellow metal is surging on a weaker US dollar and slumping Treasury yields. Gold prices have given up some of their gains on the Federal Reserve’s hawkish tone. Can gold restart a rally in the final trading weeks of 2021?

November gold futures advanced $15.40, or 0.86%, to $1,797.30 an ounce at 17:20 GMT on Friday on the COMEX division of the New York Mercantile Exchange. Gold is poised for a weekly boost of 1.6%, paring its year-to-date decline to around 5.5%.

Silver, the sister commodity to gold, is attempting to flirt with $25. December silver futures tacked on $0.325, or 1.45%, to $24.495 an ounce. The white metal will settle the week up nearly 5%, trimming this year’s decline to below 8%.

Metal commodities are booming on inflation concerns, leaving investors fearful that a growing consumer price index (CPI) and producer price index (CPI) could dissipate purchasing power.

Federal Chair Jerome Powell stated on Friday that inflation could be higher longer than the central bank had anticipated. At the same time, he signaled that it is “time to taper” the institution’s $120-billion-a-month asset purchases, but the dot-plot suggested that a rate hike could happen either by the end of 2022 or end of 2023.

Gold prices had topped $1,800 before Powell’s remarks. Gold could accelerate or decelerate after the two-day Federal Open Market Committee (FOMC) policy meeting on Nov. 2 and 3.

Meanwhile, the metals market is benefiting from a slightly weaker greenback as the US Dollar Index (DXY) slipped 0.05% to 93.73, from an opening of 93.77. The index will also endure a weekly dip of 0.25%, but it is still up more than 4.2% year-to-date. A weaker buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.

The US bond market was mixed to finish the trading week, with the benchmark 10-year yield down 0.02% to 1.655%. The one-year bill edged up 0.012%, while the 30-year bond tumbled 0.042% to 2.086%. Sliding yields are bullish for gold because it decreases the opportunity cost of non-yielding bullion.

In other metal markets, December copper futures shed $0.064%, or 1.4%, to $4.4945 per pound. December platinum futures dropped $2.30, or 0.22%, to $1,047.40 an ounce. December palladium futures added $9.90, or 0.49%, to $2,028.00 per ounce.

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