Gold prices were headed to mark their biggest weekly drop in six on Friday, driven by a robust dollar and higher bond yields as US central bankers pushed back against expectations of early rate cuts amid signs of resilience in the economy.
Spot gold was little changed at $2,022.07 per ounce by 0404 GMT, but has fallen 1.3% so far in the week. US gold futures rose 0.1% to $2,024.10.
Bullion was pressured as traders repriced their rate-cut expectations, following better than expected data and hawkish Fed speakers, Hugo Pascal, a precious metals trader at InProved, said.
The repricing offset safe-haven premium from geopolitical risks in the Middle east, Pascal said, adding that “as long as gold holds above $2,000 level, I remain positive on the metal.”
The US dollar index was down 0.2% for the day but up nearly 1% so far this week.
A stronger dollar makes greenback-denominated gold more expensive for foreign currency holders. Yields on the benchmark US 10-year Treasury notes touched a fresh five-week high of 4.1710%.
Atlanta Federal Reserve President Raphael Bostic said he was open to lower rates sooner than he had anticipated, depending on how quickly inflation falls, but that the baseline was for rate cuts to start in the third quarter.
Markets were betting on 139 basis points (bps) of Fed rate cuts this year, down from 150 bps a week earlier, according to LSEG’s interest rate probability app, IRPR.
The odds of a Fed rate cut in March have dropped to 54% from about 71% last week, according to IRPR.
Lower interest rates decrease the opportunity cost of holding bullion.
Spot silver fell 0.3% to $22.68 per ounce, platinum climbed 0.2% to $909.06, and palladium gained 0.7% to $944.63.
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