LONDON: Gold prices jumped more than a 1% on Friday, boosted by a pullback in the dollar, although bullion was headed for a monthly drop as aggressive interest rate hikes by the US Federal Reserve loom.
Spot gold climbed 1% to $1,913.90 per ounce, as of 0949 GMT, but has lost about 1.1% so far this month.
US gold futures jumped 1.3% to $1,916.40.
“The dollar strengthening early in the week was a major driver for the gold weakness, and as we’ve seen the dollar reverse.. that is clearly lending some support to gold,” Saxo Bank analyst Ole Hansen said, adding that bullion is also seeing fresh momentum from a technical buying perspective.
Drivers of gold such as diversification, volatility in stocks and bonds as well as the risk of economic growth slowing have not moved away, Hansen said.
Also lifting the safe-haven metal’s appeal, data showed the US economy unexpectedly contracted in the first quarter amid a resurgence in COVID-19 cases and drop in pandemic relief money from the government.
The dollar index slipped 0.6% after touching a 20-year high on Thursday, making gold cheaper for holders of other currencies.
Markets focus is now on the US central bank’s two-day policy meeting starting on May 3, when officials are expected to increase the target policy rate by half a percentage point.
Fed officials have aligned around plans to accelerate the pace of interest rate hikes this year, but remain split over what could be the make-or-break decision of where to stop to avoid dragging the economy into recession.
Gold prices were headed for their first monthly drop since January, as the dollar and US 10-year Treasury yields strengthened this month.
Expectations of faster US rate hikes have boosted bond yields and the dollar, increasing the opportunity cost of holding zero-yield bullion.
Spot silver rose 1.5% to $23.49 per ounce, platinum advanced 0.9% to $927.89. Both metals were still set to post a monthly fall.
Palladium jumped 1.9% to $2,274.81.
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