Gold Jumps as Japan Moves to Prop Up Yen Drive Down Greenback

Gold Jumps as Japan Moves to Prop Up Yen Drive Down Greenback

(Bloomberg) — Gold surged as Japanese authorities intervened to prop up the yen, further driving down the greenback and increasing the appeal of the precious metal.

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Bullion surged as much as 1.8% on Friday, the most in more than two weeks, and was on pace for a weekly gain, while the dollar and Treasury yields pushed lower amid expectations that large interest-rate hikes by the Federal Reserve may soon be over.

The dollar and bond rates sold off after the Wall Street Journal reported that some Fed officials are concerned about overtightening, after having raised the policy rate by 3 percentage points since March, with another three-quarter point increase anticipated next month. The US currency weakened further after Nikkei reported Japan stepped in the market to support the currency.

“Gold is staging a comeback as expectations grow that this next 75 basis-point hike will be the last major one,” Ed Moya, senior market analyst at Oanda, said. “The peak of Fed tightening appears to be right around the corner and that is good news for bullion.”

The Fed’s relentless monetary tightening to fight inflation this year has sent bullion down about 20% from its March peak, with investor holdings of gold-backed exchange-traded funds — a key pillar in driving prices to record-highs in 2020 — set to record a net outflow this year.

Gold traded 1.6% higher at $1,654.38 as of 4:06 p.m. in New York. The precious metal is heading for a weekly gain of 0.6%. Bullion for December delivery gained 1.2% to settle at $1,656.30 on the Comex. Silver and platinum rose, while palladium fell.

–With assistance from Swansy Afonso and Elina Ganatra.

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