Gold heads for weekly dip on looming rate hikes, strong dollar

By Seher Dareen

(Reuters) – Gold fell 1% on Friday and was set for its biggest weekly decline since mid-March as signs of faster policy tightening by the U.S. Federal Reserve lifted Treasury yields and the dollar.

Spot gold was down 0.8% at $1,936.14 per ounce by 12:21 a.m. ET (1621 GMT), having earlier touched its lowest level in two weeks. The metal has lost 1.9% so far this week.

U.S. gold futures shed 0.5% to $1,938.70.

“The safe-haven metals need a fresh fundamental spark to heighten investor and trader concern and it’s just not happening. The sideways grind that we’ve seen … has invited some chart-based selling,” Kitco senior analyst Jim Wycoff said.

Fed Chairman Jerome Powell said on Thursday a half-point interest rate increase “will be on the table” when the central bank meets in May, suggesting aggressive Fed actions could be used to tame soaring inflation.

The hawkish tone helped the benchmark U.S. 10-year Treasury yields extend gains and also boosted the dollar index, making gold more expensive for overseas buyers. [USD/] [US/]

Although bullion is considered a refuge asset during soaring inflation, a hike in interest rates to rein in the rising prices increases the opportunity cost of holding non-yielding bullion.

“Despite its recent lackluster price performance, gold nevertheless continues to attract demand from asset managers seeking protection against rising inflation, lower growth, geopolitical uncertainties, as well as elevated volatility in stocks and not least bonds,” Saxo Bank analyst Ole Hansen said in a note. [MKTS/GLOB] [.N]

In the physical bullion market, gold dealers in India reduced discounts this week as demand picked up slightly after prices eased, while activity in top consumer China was still muted by COVID-induced curbs. [GOL/AS]

Spot silver fell 1.5% to $24.26 per ounce, headed for its biggest weekly fall since late January, down more than 5%.

Platinum fell 3.8% to $931.42 per ounce and palladium shed 1.7% to $2,381.44.

(Reporting by Seher Dareen and Eileen Soreng in Bengaluru; Editing by Elaine Hardcastle and Aditya Soni)