LONDON: Gold prices rose half a percent on Friday as the dollar laboured near a three-year low amid heightened fears of a US government shutdown, but the precious metal was still on track for its first weekly drop in six.

The US dollar fell versus a basket of currencies after legislation to stave off an imminent federal government shutdown encountered obstacles in the Senate late on Thursday.

A weak dollar makes dollar-priced gold cheaper for non-US investors. Spot gold was up 0.5 per cent at $1,333.51 an ounce at 1458GMT, on track for a weekly drop of 0.3pc, having fallen from four-month highs hit on Monday.

US gold futures were up 0.5pc at $1,333.90. Capping gains in gold, bond yields have been rising this week on expectations that strong economic data globally will encourage the US Federal Reserve to press ahead with monetary tightening.

Expectations of rising interest rates tend to lift bond yields, reducing the appeal of holding non-yielding bullion while at the same time boosting the dollar, in which gold is priced.

“It all depends on the direction of the dollar and our forex strategists expect a dollar rebound as a result of rate hikes so gold should pare some of its gains,” said Commerzbank analyst Carsten Fritsch.

Silver advanced 0.7pc to $17.05 per ounce, while palladium gained 0.6pc to $1,106, but both metals, like gold, were set for their first weekly drop in six.

Platinum climbed 1.3pc to $1,013.30, having hit its highest since last September at $1,014.50, as it headed for its sixth weekly gain.

Published in Dawn, January 20th, 2018