Gold snaps two-week losing streak; some analysts say may have found bottom

Gold futures rose Friday to finish at one-week highs, ‌posting a weekly gain after back-to-back losses, supported by resilient investment demand despite rising U.S. Treasury yields and a stronger dollar.

Elevated bond yields and persistent inflation pressures continue to keep a lid on gold prices, but analysts noted that investors continue to see value in the market as dips continue to be bought.

Despite the risks, this week's price action suggests the gold market may have found its bottom, Forex.com market analyst Fawad Razaqzada said in a note.

"Gold investors are largely seeing through risks of tighter monetary policy because of concerns that inflation may again overshoot due to high oil prices," Razaqzada wrote. "Precious metals are proving their worth as a hedge against inflation, with fiat currencies continuing to lose value across the world due to persistent price pressures. This is reflected in gold-backed ETFs continuing to receive inflows during the recent price decline."

High borrowing costs could ultimately support gold through two scenarios, according to Saxo Bank's Ole Hansen: an economic slowdown that drives yields lower and encourages monetary easing, or rising government debt servicing costs that prompt policy intervention and weaken confidence in monetary discipline.

"Neither outcome is inevitable, and further increases in real yields remain a near-term risk," Hansen said in a note. "Nevertheless, continued ETF accumulation suggests some investors are positioned for the potential consequences of elevated borrowing costs rather than simply responding to current interest-rate movements."

Gold ​gained this week because of "bargain hunting at the lows, as a floor has been building in the $4,000-region," ​StoneX head of market analysis Rhona O'Connell wrote. "It is arguable that a further Fed hike is already priced in but so is the expectation for continued official sector net purchases. Without any Black ​Swan event, I find it hard to see gold breaking convincingly higher."

This week, front-month Comex gold (XAUUSD:CUR) for October delivery gained 1.4% to $4,191.00/oz, its highest settlement value in a week, and front-month Comex October silver (XAGUSD:CUR) added 1.1% to $60.670/oz; on Friday, gold and silver rose 1.4% and 2.7%, respectively.

ETFs: (GLD), (GDX), (GDXJ), (IAU), (NUGT), (PHYS) (GLDM), (AAAU), (SGOL), (DUST), (RING), (BAR), (OUNZ), (SGDM), (SGDJ), (SLV), (PSLV), (SIVR), (SIL), (SILJ)