Gold Heads for Weekly Gain as U.S. Fiscal Concerns Cause Tremors
Gold is heading for its biggest weekly gain in more than a month, as investor concerns about the U.S. fiscal deficit boosted the metal’s appeal.
Bullion is trading above $3,300 an ounce, heading for a weekly gain of about 3%. After Moody’s Ratings’ decision to strip the U.S. of its top credit rating, investors are now worried that President Donald Trump’s special tax bill—passed by the House and now headed to the Senate—will widen the already ballooning deficit.
Bullion has surged more than a quarter this year, and is about $200 below its all-time high hit last month. Its rise has been supported by the impact of the U.S.-led trade war, which has fueled demand for safe-haven assets, and more recently by the country’s fiscal concerns. Central banks have also been consistent buyers of bullion as they seek to diversify their reserves.
“Gold is likely to remain rangebound in the near term,” said Justin Lin, an analyst at Global X ETFs. “However, ongoing geopolitical tensions and rising concerns about the U.S. fiscal outlook continue to provide underlying support.” Read More: Long-Term Bond Yields Surge Globally on Fiscal Policy Concerns In the U.S., the amount of government bonds outstanding has skyrocketed from $4.5 trillion in 2007 to nearly $30 trillion now, while the ratio of total U.S. public debt to the size of the economy has risen from about 35% in 2007 to 100% now, according to the Congressional Budget Office.
The yield on the 10-year U.S. Treasury note has risen this week, topping 4.5%. In previous years, such a move would have been a major drag on gold because it pays no interest, with bullion prices and yields typically moving inversely. That correlation has weakened. Gold was trading 0.3% higher at $3,304.81 an ounce at 9:10 a.m. in Singapore, after closing 0.6% lower on Thursday. The Bloomberg Dollar Spot Index was flat, heading for a weekly loss. Silver, palladium and platinum are all set for gains this week, with platinum up nearly 10%, after rallying to its highest in a year.
Source: Bloomberg
