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Gold Logs Another Weekly Gain Amid Inflation Concerns, US Stimulus Deadlock

December 11, 2020 at 18:43 by Andrew Moran

Gold futures are poised to log another weekly gain as inflation concerns, a US fiscal stimulus deadlock, and European Union-Brexit talks supported the yellow metal on Friday. Gold prices have had a whirlwind week, seesawing between positive and negative territory. But a strengthening US dollar placed a cap on the precious metal’s ascent to finish the trading week.

January gold futures picked up $8.20, or 0.45%, to $1,845.60 per ounce at 17:22 GMT on Friday on the COMEX division of the New York Mercantile Exchange. Gold is on track for a tepid weekly gain of 0.2%, raising its year-to-date rally to around 21.4%.

Silver, the sister commodity to gold, is also recording modest gains to finish the trading week. March silver futures rose $0.061, or 0.25%, to $24.155 per ounce. The white metal will endure a weekly decline of 0.6%, but it remains up 35% in 2020.

Investors are monitoring inflation of key commodities to wind down 2020. The Commodity Research Bureau Index surged 11% in November. The index has been showing an upward trend in agriculture and energy commodity prices, many of which have risen to multi-year highs in 2020, and they are set to rise even further heading into 2021.

From soybeans to wheat to orange juice, commodities have enjoyed one of their best years in a long time. This explains why many major economies are warning about higher grocery bills next year. In Canada, for example, an average family of four is anticipated to spend an extra $700 in 2021 at the supermarket.

Broader financial markets are not too concerned right now because the producer price index (PPI) rose only 0.1% in November, the smallest increase in seven months. This came one day after the consumer price index (CPI) edged up 0.2% in November, buoyed mostly by higher food and shelter prices.

Meanwhile, traders are also keeping an eye on developments in US fiscal stimulus negotiations and discussions between the European Union and Great Britain regarding a Brexit trade agreement.

A stronger US dollar is weighing on metal assets on Friday. The US Dollar Index, which gauges the greenback against a basket of currencies, advanced 0.18% to 90.98, from an opening of 90.74. The index is poised for a weekly jump of 0.3%, paring its year-to-date drop to 5.6%. A stronger buck is bad for dollar-pegged commodities because it makes it more expensive for foreign investors to purchase.

In other metal markets, January copper futures tumbled $0.048, or 1.34%, to $3.528 per pound. January platinum futures shed $6.50, or 0.63%, to $1,021.20 an ounce. January palladium futures slipped $9.50, or 0.41%, to $2,326.00 per ounce.

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