Gold eyes weekly gain on Middle East tensions; palladium hits record

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Gold rose on Friday, heading for its first weekly rise in four, helped by a weaker dollar and escalating tensions in the Middle East, while palladium soared to a new all-time peak amid short supply.

Spot gold was up 0.3 per cent at $1,503.28 per ounce, as of 1005 GMT, up about 1 per cent so far this week.

US gold futures were up 0.3 per cent at $1,510.80.

“The jittery situation in the Middle East is one of the reasons to be concerned and switch to safe-havens, after disappointing knee-jerk reaction following the US Federal Reserve rate cut,” Commerzbank analyst Eugen Weinberg said.

The dollar was headed for a third straight week of losses, making gold cheaper for investors holding other currencies.

Adding to the safe-haven appeal of gold, the United States said it was building a coalition to deter Iranian threats following a weekend attack on Saudi Arabian oil facilities.

Earlier this week, the Fed cut interest rates for the second time this year, but gave mixed signals on future rate cuts.

“Global outlook still looks quite unfavourable and central banks around the globe will continue to ease monetary policy which will be beneficial for gold,” said FXTM analyst Lukman Otunuga.

Gold tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion.

Markets also focussed on US-China trade talks in Washington before high-level discussions next month. US and Chinese deputy trade negotiators resumed face-to-face talks for the first time in nearly two months on Thursday.

“Given potential upside catalysts (for gold) in the coming months such as a dovish Fed and trade uncertainty, there is a risk that investors once again get left behind,” UBS analysts said in a note.

“Indicators suggest that market participants have reduced longs and are focusing on the $1,480 support area all the way down to $1,450 as attractive levels to re-engage.”

Meanwhile, palladium jumped 1.4 per cent to $1,646.34 per ounce, having hit a record $1,648.80. The auto-catalyst metal in short supply, is up 2.6 per cent for the week, on track for a seventh straight weekly gain.

“What we’re seeing is continuing purchase in palladium not only by speculators but also car producers. Consumers are becoming concerned about rising prices and would rather be buying it now than later,” Commerzbank’s Weinberg said.

Silver was up 0.6 per cent at $17.87 an ounce, notching up a 2.6 per cent gains for the week, heading for its first weekly gain in three.

Platinum climbed 1.1 per cent to $946.89 per ounce