Gold prices firm, but set for 3rd weekly fall on Fed rate hike prospects

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Gold prices were on track for a third

straight weekly decline on Friday as investors fretted over the

prospects of aggressive rate hikes from the U.S. central bank,

though slight pullback in dollar helped the precious metal to

tick higher on the day.

Spot gold rose 0.3% to $1,881.95 per ounce by 1017

GMT, but was down 0.8% for the week. U.S. gold futures

were up 0.4% to $1,883.50.

The dollar index eased 0.4% after hitting a fresh

20-year high, making gold less expensive for those holding other

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currencies. However, the U.S. currency was headed for fifth

weekly gain, while the benchmark U.S. Treasury yields

held near the key 3% level.

“Gold’s got some pretty strong headwinds, notwithstanding

serious inflation, from both the dollar index being up to

multi-decade highs and the 10 year U.S. Treasury back above the

3% level,” independent analyst Ross Norman said.

European stocks headed for their worst week in two months as

investors expect bigger interest rate hikes will be needed to

rein in inflation.

While gold is perceived as an inflation hedge, higher U.S.

interest rates lift the opportunity cost of holding zero-yield

bullion.

The U.S. Federal Reserve on Wednesday raised its benchmark

rate by half a percentage point, the most in 22 years, but

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Chairman Jerome Powell explicitly ruled out raising rates by

three-quarters of a percentage point in a coming meeting.

“Gold was unable to capitalize on Powell’s less hawkish than

expected message this week, with bullion bulls aware that U.S.

rates are bound to rise anyway,” Han Tan, chief market analyst

at Exinity, said.

“Should Friday’s non-farm payrolls point to a resilient U.S.

jobs market that paves the way for more Fed policy tightening,

that could strengthen the cap on gold’s upside.”

Silver fell 0.5% to $22.39 per ounce, platinum

fell 2.6% to $954.94 and palladium fell 2.3% to

$2,137.38.

(Reporting by Eileen Soreng and Seher Dareen in Bengaluru

Editing by Tomasz Janowski)