Gold hits near 6-year high on cenbank stimulus hints, Middle East worries

Key Points
  • Gold sees best week in more than 3 years.
  • Spot gold up nearly 4% so far this weak.
  • Silver on track for best week in 2019.
  • Dollar on course for a weekly loss.
Gold bars sit in a vault at the Perth Mint Refinery, operated by Gold Corp, in Perth, Australia, on August 9, 2018.
Carla Gottgens | Bloomberg | Getty Images

Gold jumped to a near six-year high on Friday, surpassing the key $1,400 level before shedding some gains, but bullion was headed for its best week in more than three years on dovish signals from major central banks and rising tensions in the Middle East.

Weaker dollar, falling yields and tensions in the Middle East have lifted the precious metal by nearly 4% so far this week - its biggest since the week ended April 29, 2016, and also set for a fifth consecutive weekly rise. 

Spot gold was up 0.3% at $1,391.50 per ounce as of 0723 GMT, after earlier hitting its highest since Sept. 4, 2013 at $1,410.78.

U.S. gold futures were steady at $1,396.30 an ounce.

"The dovishness of the Fed and ECB, geopolitical tensions in the Middle East, and a technical breakout above $1,350 with volumes gave strong support for the metal," said Jigar Trivedi, a commodities analyst at Mumbai-based Anand Rathi Shares & Stock Brokers.

"Momentum is positive for the next half of the year. The way prices have risen, there could be a technical profit-booking, but the undertone is positive," he said.

The Fed earlier this week said it was ready to battle growing global and domestic economic risks, hinting at interest rate cuts beginning as early as next month.

With the Fed possibly easing its policy soon, and other central banks such as the European Central Bank (ECB) and the Bank of Japan likely to follow in their wake, government bonds were on a bullish footing.

Since Wednesday, bullion has risen as much as $70 after Fed's dovish comments and increased Middle East tensions.

"A global wave of monetary policy easing has the impact of pushing global bond yields lower and is a key positive driver for gold," said Heng Koon How, head of markets strategy at Singapore's United Overseas Bank.

The dollar was set for a weekly loss against major currencies, and U.S. benchmark 10-year Treasury yields dropped below 2% for the first time in more than 2-1/2 years.

"We maintain our ... bullish call for gold and it looks like our mid-2020 target of $1,450 may be reached much sooner," How said. 

Adding to the global anxiety were fresh worries about Middle East tensions after Iran shot down a U.S. military drone, raising fears of a military confrontation between Tehran and Washington.

Among other precious metals, silver fell 0.8% to $15.29 per ounce. 

However, the metal was on track for its biggest weekly percentage gain this year.

Platinum was up 0.4% to $805.99 per ounce. Palladium edged 0.1% higher to $1,479.36 an ounce and was headed for a third consecutive weekly gain.