Gold headed for a third weekly advance as fears that SARS-CoV-2 variants might endanger the economic recovery spurred investor demand for havens.
Bullion is winning back investors after a bleak last month, helped by a sharp decline in US Treasury yields, which burnish the appeal of the non-interest bearing metal.
Renewed virus fears around the world have taken the edge off the so-called reflation trade, causing global stocks to slump on Thursday. Bullion held gains even though US bond yields and equities rebounded on Friday.
The risks to the recovery were underscored this week by US Federal Reserve minutes that highlighted continued uncertainties.
China’s central bank cut the amount of cash most banks must hold in reserve, a move that went further than many economists expected and suggested growing concerns about the economy’s recovery.
“Gold’s credentials as a hedge against unforeseen developments has, in our opinion, strengthened during the past month,” Saxo Bank A/S analyst Ole Hansen said in a note. “We believe gold has major upside potentials should the global recovery not play out as anticipated or inflation begins to move above expectations.”
Seasonality will likely to see gold rise in the third quarter of this year, Sprott Asset Management market strategist Paul Wong said.
In the past 20 years, the third quarter was the best seasonal period for gold and the companies that mine it, he said in a note.
Gold rose 0.5 percent to US$1,811.81 an ounce in New York. It gained 1.4 percent this week.
Futures for August delivery on the Comex rose 0.6 percent to settle at US$1,810.60.
Spot silver, platinum, and palladium also gained on Friday.
Meanwhile, in another sign of how supply chains are being snarled all over the world, a leading US maker of stainless steel was forced to declare force majeure at its Kentucky mill because it cannot get enough of the industrial gases it needs. One of the reasons for that is a shortage of trucking, a problem seen across a number of industries.
North American Stainless Inc (NAS), which produces the metal that goes into everything from kitchenware to guitars and airplanes, will not be able to sustain its normal melting operations at the plant in Ghent, the company said in a letter to customers seen by Bloomberg.
North American, a subsidiary of Spain’s Acerinox SA, accounts for about 40 percent of total stainless steel supplies in the US.
Shortages of everything from containers to pallets and bottlenecks at ports have caused delays, and pushed up prices for commodities and finished goods as economies recover from the pandemic.
Some gasoline stations in parts of the US last month suffered temporary shortages because there were not enough tanker-truck drivers to deliver the fuel.
North American and Acerinox did not immediately respond to e-mail and telephone requests for comment.
The logistical challenges are now translating into “outright production disruptions at Acerinox’s most profitable and cash generative division,” Morgan Stanley analysts, including Ioannis Masvoulas, said in a note. “While profitability across the rest of the Acerinox group should rebound strongly this year, any temporary output loss at the NAS division would weigh on” third-quarter earnings, the analysts said.
The company declared a suspension of all performance obligations as well as indefinite delay of any and all further deliveries at the Kentucky plant, the letter said.
NAS said in the letter that it is working to make alternative arrangements to meet its obligations.
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