(Bloomberg) — Gold ( GC=F ) headed for the biggest weekly gain in more than a month, as investor concern about the US fiscal deficit boosted the metal’s appeal.
Bullion rose toward $3,330 an ounce, on course for a weekly climb of almost 4%. After Moody’s Ratings’ decision to strip the US of its top credit rating, investors are now concerned that President Donald Trump’s signature tax bill — which passed the House and now goes to the Senate — will boost the already swelling deficit.
Bullion has surged by more than a quarter this year, and is about $200 below the all-time-high reached last month. Its ascent has been underpinned by the fallout from the US-led trade war, which stoked haven demand, as well as more recently by the nation’s fiscal concerns. Central banks have also been consistent gold buyers as they seek to diversify their reserves.
“Gold is likely to remain range-bound in the near term,” said Justin Lin, an analyst at Global X ETFs. “However, ongoing geopolitical tensions and increasing concerns about the US fiscal outlook continue to provide underlying support.”
In the US, the amount of outstanding Treasuries has skyrocketed from $4.5 trillion in 2007 to nearly $30 trillion today, while the ratio of total US public debt to the size of the economy has risen from about 35% in 2007 to 100% now, according to the Congressional Budget Office.
Yields on 10-year US Treasuries have pushed higher this week, topping 4.5%. In earlier years, such a move would have been a major headwind for gold as it doesn’t pay interest, with bullion prices and yields typically moving inversely. That correlation has now weakened.
Gold traded 1.1% higher at $3,329.54 an ounce at 2:17 p.m. in Singapore, after closing 0.6% lower on Thursday. The Bloomberg Dollar Spot Index slipped 0.3%, on course for a weekly loss. Silver, palladium, and platinum were all set for gains on the week, with platinum up by 10%, having rallied to the highest in a year.
