Gold sets forth weekly gains on Friday with US debt concerns sticky

LONDON (May 23) Gold (XAU/USD) price extends its weekly gains, trading near $3,329 at the time of writing on Friday, up nearly 1% on the day, on a new tailwind for the safe haven precious metal. The spending bill from United States (US) President Donald Trump passed through the House of Representatives on Thursday and is now on its way to the Senate. Traders are worried that the spending bill will only add more US debt, while income from tariffs remains to be seen as enough to provide funding for all the spending.

The best place to track these concerns is the US 30-year benchmark rate. Yields in that maturity rallied to 5.15% on Thursday from 4.64% at the start of May, a more than one-year high since the 5.18% seen at the end of December 2023. Adding all things up, the recent downgrade on US credit rating from agency Moody’s, and now this spending bill, which adds $3.8 billion to the US debt, traders and market participants demand a higher premium or return before considering buying US debt bonds, which pushes US yields higher, the Economic Times reports. 

Daily digest market movers: China gold rush picks up again

• Yields on 10-year US Treasuries have pushed higher this week, topping 4.5%. In earlier years, such a move would have been a major headwind for Gold as it doesn’t pay interest, with bullion prices and yields typically moving inversely. That correlation has now weakened, Bloomberg reports.
• “Gold is likely to remain range-bound in the near term,” said Justin Lin, an analyst at Global X ETFs. “However, ongoing geopolitical tensions and increasing concerns about the US fiscal outlook continue to provide underlying support”, Bloomberg reports. 
• China’s onshore, gold-backed Exchange Traded Funds (ETFs) saw inflows resume as prices rebounded, according to a report by China Securities Journal. Some 20 Gold ETFs listed on Chinese bourses received inflows of about 370m Yuan on May 21, the report said, Bloomberg reports. 
• If output doubles as planned, Ghana expects to rake in $12 billion a year from small-scale Gold production. Gold exports from Ghana have surged as international prices have soared, and much of that expansion is down to small mines and artisanal production. This year, the government set up a regulator to handle all Gold buying and selling, hoping to boost foreign-currency reserves and curb black-market trading, Reuters reports. 

FXStreet