The prices of gold climbed to close to its two-month high on Friday as investors went into year-end hedging and the U.S. dollar weakened. The precious metal is on track to have its best week in almost five months.
U.S. gold futures rose by 0.2% to $1,517.60 an ounce while spot prices gained by 0.1% to $1,512.82 an ounce as of 04:58 GMT. Spot gold has already gained more than 2% so far this week, its best performance since August.
According to Jeffrey Halley, OANDA’s senior market analyst for the Asia Pacific, gold’s break from the $1,485/oz level prompted stop-loss buying which in turn lifted the bullion to the $1,500/oz level. He also said the market is definitely in a risk hedging mode in this time of the year when volumes are lower than the usual and liquidity is high.
Aside from the softer dollar, the pricing of the yellow metal was supported by the news that Russia could invest a portion of its National Wealth Fund in gold. Finance Minister Anton Siluanov said he thinks that investment in gold is more sustainable than investments in financial assets in the long-term.
AxiTrader’s market strategist Stephen Innes believes that if Russia decides to hold gold, it could significantly lower supplies because Russia is the largest gold producer in the world.
Meanwhile, the gold’s price gain was limited by the strong rally of the Asian stock markets which soared to an 18-month high. Investors were also encouraged by the release of data which shows that the profitability of Chinese industrial companies in November grew at its fastest rate since March.
In a related development, the holdings of the largest gold-backed exchange-traded fund in the world SPDR Gold Trust increased to its highest level since November 29 at 892.37 tons.
The gold price has already increased by almost 18% this year and is on track to record its best year since 2010. This is mainly due to the 17-month U.S.-China trade war.