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James Hyerczyk
Gold

Gold futures are trading higher on Friday, holding on to earlier gains, following the release of the disappointing U.S. Non-Farm Payrolls report. Helping to underpin prices are mixed U.S. Treasury yields and a sharp break in the U.S. Dollar. Traders are also reacting positively to the news from Washington regarding President Joe Biden’s stimulus package.

At 16:29 GMT, April Comex gold futures are trading $1809.30, up $18.10 or +1.01%.

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Despite Friday’s jump in prices, gold was set for its worst weekly dip in four as investors continued to bank on the greenback with U.S. Treasury yields also gaining. Since the start of the new year, gold’s status as a hedge against inflation from widespread stimulus has been challenged by higher yields because they increase the opportunity cost of holding non-yielding bullion.

US Treasury Yields Rise as Unemployment Rate Dips

U.S. government debt prices rose on Friday morning as the monthly jobs report showed that the unemployment rate ticked down in January. Since yields move inversely to prices, this meant that Treasury yields fell. Lower yields tend to support gold prices.

The headline unemployment rate declined to 6.3% from 6.7% in January, according to the Labor Department, but some of the underlying numbers were less encouraging. The economy added 49,000 jobs, slightly missing estimates, and a revision to the December report showed a larger loss of jobs than previously reported.

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Biden Administration Pushes Ahead with Stimulus Plans

President Joe Biden’s administration is pushing ahead with plans to pass a $1.9 trillion economic relief plan, seeking to prop up the U.S. economy as it grapples with the ongoing COVID pandemic.

The stimulus plan has prompted disagreement with Republican lawmakers over state and local funding and other provisions. However, it is thought the relief plan, known as the American Rescue Package, could still pass with bipartisan support even if Democrats use a process that requires only a simple majority of senators.

China Gets Holiday Boost, Indian Gold Buyers Cheer Price Dip

Physical gold demand picked up in China this week ahead of the Lunar New Year festival, while Indian retail buyers cheered a sharp dip in domestic rates, according to Reuters. Singapore dealers, meanwhile, flagged a possible supply crunch fueled by a surge in interest for silver.

Demand is “a little better due to the Lunar new year,” said Ronald Leung, chief dealer for Lee Cheong Gold Dealers in Hong Kong, adding premiums could rise further if prices remain low following the holiday.

In India, a dip in prices to a near eight-month trough drew buyers in.

Daily Forecast

April gold is rebounding following a test of a long-term 50% level at $1787.30 on Thursday. Investors have shown little reaction to the news today, but the break into the support zone seems to have woken up investors looking for value.

For a look at all of today’s economic events, check out our economic calendar.

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