Gold prices fell on Friday as the prospect of aggressive interest rate hikes boosted U.S. Treasury yields and the dollar, denting zero-yielding bullion’s appeal and setting prices on track for their first weekly decline in three.
Spot gold was down 0.44% to US$1,942.91 per ounce at 1005 GMT. U.S. gold futures eased 0.2% to US$1,945.20.
“We are dealing with the global economy where interest rate hike expectations continue to move up, as a result yields are moving higher and the dollar is trading stronger, all potential strong challenges to gold at this point,” Saxo Bank analyst Ole Hansen said.
However, “gold is holding within the established range… The reason being the market is worried that these very strong expectations for rate hikes in the U.S. may lead to a bigger than expected economic slowdown.”
U.S. Federal Reserve Chairman Jerome Powell said on Thursday a half-point interest rate increase “will be on the table” when the central bank meets in May and that it would be appropriate to “be moving a little more quickly.”
Benchmark U.S. 10-year Treasury yields extended gains on the Fed’s hawkish tone on tightening policy in its effort to tame soaring inflation. Meanwhile the dollar index scaled a fresh peak since March 2020.
Gold is highly sensitive to rising U.S. interest rates and higher yields, which increase the opportunity cost of holding bullion, while boosting the dollar, in which it is priced.
Gold is down about 1.3% so far this week. Prices rose to near the key mark of US$2,000 per ounce on Monday on safe-haven demand and mounting worries over inflation, only to pull back and hit a two-week low on Thursday.
Spot silver fell 1.8% to US$24.19 per ounce and was headed for its biggest weekly fall since late January.
Platinum slipped 1.3% to US$955.28 per ounce and palladium was 1.4% lower at US$2,388.21.
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