Gold heads for fifth week of gains, silver jumps to 22-month high

A salesman arranges jewellery at a shop at the gold souk in Deira, April 17, 2013. (Reuters)

Gold rose 1 percent on Friday and was headed for its fifth weekly gain, supported by a weaker dollar and prospects for further monetary policy easing in the wake of Britain's vote to leave the European Union.

Spot gold rose to a session high of $1,338 an ounce, and was up 0.9 percent at $1,333.80 an ounce by 1015 GMT. The metal gained 8.8 percent in June, its biggest monthly rise since February.

Gold's strength benefited silver, which breached the $19 an ounce level on Friday for the first time since September 2014. It rose as much as 3.8 percent to $19.40 in earlier trade and was trading up 2.6 percent at $19.17. Silver has gained more than 8 percent this week and was on track for its best week since August 2013.

"For gold, the initial reaction was safe-haven demand due to the uncertain political situation in Europe, but then the latest move might be more of a reaction to comments from central banks that they are moving to an easing bias," Danske Bank senior analyst Jens Pedersen said.

"Near term, the pivotal moment for gold will be next Friday's (U.S.) jobs report, because a decent print will at least remove the uncertainty about the state of the U.S. jobs market and the Fed's decision to postpone any rate hike would be more about the external effect of the Brexit vote on the U.S.
economy."

The dollar fell 0.3 percent against a basket of six currencies, while European stocks recovered on signs that central banks such as the Bank of England, the Bank of Japan and the European Central Bank will loosen monetary conditions even further.

Concerns about the global economy have made a US interest rate rise in coming months less likely, analysts say, but much will depend on US economic data and markets will be watching the non-farm payrolls number scheduled for July 8 in particular for clues on the outlook for monetary policy.

Low US interest rates are positive for gold because the opportunity cost of holding it decreases while the dollar falls, making the metal cheaper.

Societe Generale raised its gold price forecasts on Thursday on concerns over the ongoing political, financial and economic fallout of Britain's vote last week to leave the European Union.

"Looking ahead, it seems that gold will remain one of the major beneficiaries in the current backdrop, as heightened volatility and lingering uncertainty will keep investors' risk appetite in check," the bank said in a note.

Platinum marked its highest level since May 18 at $1,035 an ounce and was on track for its best weekly rise since the end of April.

Palladium, heading for its best week since early March, rose to its highest since May 13 at $601, before retreating and was down 0.5 percent at $591.76.

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Last Update: Friday, 01 July 2016 KSA 16:40 - GMT 13:40
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