Gold sees weekly decline amid hawkish Fed signals

Gold rose Friday on the back of a weak dollar but was still on the cusp of its first weekly decline in three weeks, weighted by signals from US central banks that interest rate hikes are on the horizon.

 

Spot gold rose 0.1% to $1,763.17 an ounce by 0303 GMT, down about 0.4% weekly.

 

US gold futures rose 0.2% to $1,765.50.

 

Gold continues to be supported by growing recession risks, the ongoing war in Ukraine and the peak of the US dollar, according to a note by Fitch Solutions.

 

"On the other hand, growing optimism about the Chinese economy, still high risks that the US Federal Reserve will raise rates further and more aggressively than the market expects, and the inflation peak in the third quarter will continue to put pressure on gold".

 

As some respite for gold, the rival safe haven dollar index declined, making bullion cheaper for overseas buyers.

 

However, the US currency was still aiming for its best week in a month as hawkish remarks by Fed officials and stronger-than-expected monthly domestic retail sales stalled a pullback triggered by signs of softening inflation.

 

Markets are currently estimating an 87% chance of a 50bps rate hike at the Fed's December meeting after four consecutive 75bps hikes.

 

High interest rates discourage investment in gold that does not pay interest.

 

After several months of falling, gold prices rose on expectations that the pace of US rate hikes will slow down, but analysts say that institutional investors are cautious and further growth may be elusive.

 

Other metals, spot silver rose 0.8% to $21.11 an ounce, platinum added 0.4% to $984.50 and palladium XPD= rose 0.7% to $2,020.21. However, they all ended the week with a decline.