Forexpros – Gold futures rose for the first time in three days on Friday, as a broadly weaker U.S. dollar boosted the appeal of the precious metal while some mild bargain buying also lent support.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery settled at USD1,789.65 a troy ounce by close of trade on Friday, adding 1.93% over the week, the third consecutive weekly gain.
Gold prices jumped 1.7% on Friday as the dollar index, which tracks the performance of the greenback against a basket of six other major currencies, declined 0.93% to settle at 77.10.
Dollar weakness usually benefits gold, as it boosts the metal’s appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Market sentiment continued to be dominated by developments surround the euro zone’s debt crisis. Italy’s Parliament approved an amendment to the country’s 2012 budget, paving the way for the resignation of Prime Minister Silvio Berlusconi on Saturday.
Concerns over Italy’s debt crisis intensified on Wednesday after the yield on Italian 10-year government bonds soared to a euro-lifetime high of 7.48%, above the 7% level which prompted Greece, Ireland, and Portugal to seek international bailouts.
Elsewhere, Greece’s caretaker Prime Minister Lucas Papademos and his cabinet were sworn in on Friday. Papademos will implement the country’s latest EUR130 billion bailout before leading the country to early elections.
Meanwhile, gold traders turned their attention to France, after ratings agency Standard & Poor’s erroneously issued a message saying it had cut France’s triple-A credit rating on Thursday.
The yield on 10-year French bonds rose to 3.51% on Friday, the highest since May 5, despite a statement from S&P saying that the report was sent out because of a “technical error”.
Some mild bargain buying also lent support, after gold prices fell to USD1,735.75 on Thursday, the lowest price since November 3, as signs of political progress in Italy and Greece reduced the safe haven appeal of the precious metal.
Japanese investment bank Nomura raised its average gold price forecast to USD2,000 an ounce by the end of 2012, up from a previous estimate of USD1,800.
In a report released late Thursday, the brokerage cited “the low-interest rate environment in the U.S., the European Central Bank’s easing monetary policy and the Bank of England’s second round of quantitative easing among the reasons for the precious metal’s attractiveness as an inflation hedge”.
Elsewhere on the Comex, silver for December delivery settled at USD34.69 a troy ounce by close of trade on Friday, gaining 1.78% on the week, while copper for December delivery settled at USD3.474 a pound, slumping 2.55% over the week.
In the week ahead, investors will continue to closely monitor developments in the euro zone as talks on the formation of an emergency government in Italy get started. U.S. data on inflation will also be in focus.
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