Gold held steady on Friday, supported by a plunging dollar and declining stocks but hawkish comments from major central banks suggesting a shift toward tighter monetary policies kept the bullion shy of major gains. The dollar index , which measures the greenback against a basket of currencies, hit a fresh nine-month low at 95.470 on Friday, and Asian shares were pulled down by weaker European and U.S. markets.
Spot gold rose 0.1 percent to $1,246.62 per ounce, as of 0436 GMT. U.S. gold futures for August delivery were up 0.1 percent at $1,246.90 per ounce. Gold slid 1.7 percent in June in its first monthly decline this year, but gained over 8 percent so far in 2017. “Typically, a weaker dollar should provide gold with something of a tailwind, but the fact this has not been happening suggests that there is an offsetting variable at work here,” INTL FCStone analyst Edward Meir said in a note.
“The first thing that comes to mind is that yields on both sides of the Atlantic are pushing higher, as a raft of hawkish comments from various central bankers are roiling Western bond markets,” he added. On Thursday, Germany’s 10-year government bond yield rose to a seven-week high, and benchmark U.S. Treasury yields touched six-week highs on the likelihood that central banks in Europe will become less accommodative.
Comments from top central bankers including European Central Bank head Mario Draghi, Bank of England Governor Mark Carney, and top policymakers at the Bank of Canada earlier this week have indicated that quantitative easing is being put back in its box and interest rates are going to go up. Gold is highly sensitive to rising interest rates, which increase the opportunity cost of holding non-yielding bullion.
However, losses in the dollar, in which it is priced, have been offsetting the impact of higher yields to keep gold range-bound. “Central banks worldwide are going to have some kind of less stimulative economic policies. The only question is about the matter of degree and not about the direction itself, about the pace of their exit strategies,” said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.
Among other precious metals, spot silver is up 4.7 percent for the year despite having shed over 8 percent in the second quarter. Silver rose 0.4 percent to $16.65 per ounce on Friday. Platinum was flat at $919.78, slipped nearly 3 percent this quarter, but is up about 2 percent for the year. Palladium , which has been the best performing precious metal this year, edged up 0.2 percent to $848.85 per ounce. The metal surged about 25 percent this year, and is poised to have its best year since 2010.