Gold Edges Up, Still On Track for Worst Weekly Slump Since June

(Bloomberg) -- Gold edged higher at the end of a downbeat week that saw the metal drop to its lowest point in more than a year.

Bullion rose slightly to trade just below $3,900 an ounce. Prices briefly hit a 13-month low on Thursday as investors ramped up bets on the Federal Reserve raising interest rates. Yields on some Treasuries surged by more than 12 basis points in the previous session, with the biggest increases seen in short-term securities that are more sensitive to changes in central bank policy. 

The decline “at the end of the New York session was concerning but correlated well with the rising bond yields,” said Rajeev De Mello, global macro portfolio manager at GAMA Asset Management SA. Friday’s gain “can only be explained by reserve managers stepping in,” after gold slipped below $4,000 an ounce earlier this week, he added.

Gold previously tested that key psychological level in July and again in late October, with demand from long-term investors such as central banks and large institutional buyers, along with Chinese households, supporting prices. 

Still, bullion was set for a weekly drop of about 4.3%, the largest since June. The decline was triggered by a report showing faster-than-expected increase in US consumer prices, and hawkish comments from Fed officials. Higher borrowing costs tend to weigh on gold, as it doesn’t pay interest.

Traders are pricing in a quarter-point rate increase from the Fed next month, with an an outside chance of a half-point move. Some also see hikes extending beyond December.

Spot gold rose 0.5% to $3,894.79 an ounce as of 12:16 p.m. London time, while silver edged higher to $50.05. Platinum declined, and palladium advanced. The Bloomberg Dollar Spot Index was little changed. 

--With assistance from Rob Verdonck and Preeti Soni.

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