Gold was heading for a third weekly advance as fears that SARS-CoV-2 variants could jeopardize the economic recovery boosted investor demand for safe havens.
Bullion rallied back to investors after a bleak month, helped by sharply lower yields on US Treasuries, which tarnished the appeal of the non-interest bearing metal.
Renewed fears of viruses around the world slowed so-called reflation trade, causing global stocks to fall on Thursday. Bullion maintained gains even as bond yields and US stocks rebounded on Friday.
The risks to the recovery were underscored this week by the minutes of the US Federal Reserve which highlighted the persistence of uncertainties.
China’s central bank reduced the amount of liquidity most banks are required to 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 have, in our view, strengthened over the past month,” Saxo Bank A / S analyst Ole Hansen said in a note. “We believe gold has significant upside potential if the global recovery does not go as planned or if inflation starts to exceed expectations.”
Seasonality is expected to see gold rise in the third quarter of this year, said Paul Wong, market strategist at Sprott Asset Management.
For the past 20 years, the third quarter has been the best seasonal time for gold and the companies that mine it, he said in a note.
Gold rose 0.5% to US $ 1,811.81 an ounce in New York City. It gained 1.4% this week.
Futures for August delivery on Comex rose 0.6% to US $ 1,810.60.
Spot silver, platinum and palladium also gained on Friday.
Meanwhile, another sign of how supply chains are being harassed around the world, a major U.S. stainless steel maker has been forced to report force majeure at its Kentucky plant because it fails to cannot get enough industrial gases that it needs. One of the reasons for this is the shortage of trucking, a problem seen in a number of industries.
North American Stainless Inc (NAS), which produces the metal that goes into everything from kitchenware to guitars and planes, will not be able to continue with normal smelting operations at the Ghent plant, the company said. in a letter to clients seen by Bloomberg. .
North American, a subsidiary of Spain’s Acerinox SA, accounts for about 40 percent of the total stainless steel supply in the United States.
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 gas stations in parts of the United States suffered temporary shortages last month because there were not enough tanker drivers to deliver the fuel.
North American and Acerinox did not immediately respond to requests for comment by email and phone.
Logistical challenges now translate into “outright production disruptions in Acerinox’s most profitable and cash-generating division,” Morgan Stanley analysts, including Ioannis Masvoulas, said in a note. “While the profitability of the rest of the Acerinox group is expected to rebound strongly this year, any temporary production loss from the NAS division would weigh on” third quarter results, analysts said.
The company has declared a suspension of all performance obligations as well as an indefinite delay on any further deliveries to the Kentucky plant, according to the letter.
NAS said in the letter that he was working to make other arrangements to meet his obligations.
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