Gold prices climbed on Friday, poised for their best week since mid-November, as the dollar weakened after the US Federal Reserve decided to withdraw its pandemic-era stimulus in response to fight broadening inflationary risks.
Spot gold was up 0.2 per cent at $1,802.87 per ounce, as of 0323 GMT, while US gold futures rose 0.3 per cent to $1,802.60. The metal has risen 1.1 per cent so far in the week, heading for its first weekly gain in five.
The dollar index remained under pressure after hitting a one-week low in the previous session, making greenback-priced bullion cheaper for holders of other currencies. The benchmark 10-year yield dropped 3.8 per cent so far in the week.
"The gold market is benefiting from high inflation, which is outweighing the Fed's hawkish stance. US 10-year real yield moved deeper into negative territory, keeping the investment backdrop supportive," ANZ analysts said in a research note.
"Should negative interest rates stay longer than expected, it should favour investor demand for gold."
Britain became the first G7 economy to hike interest rates since the onset of the pandemic on Thursday, with the US central bank also signalling plans to tighten in 2022 but the European Central Bank only slightly reining in stimulus.
The Bank of Japan on Friday decided to taper its corporate debt purchases to pre-pandemic levels and scale back some of its emergency funding scheme upon reaching the March 2022 deadline.
Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of holding bullion, which bears no interest.
The US Fed said it would pave the way for three quarter-percentage-point interest rate increases by the end of 2022 as the economy nears full employment and the Fed copes with a surge of inflation.
Silver dipped 0.1 per cent to $22.44 per ounce, platinum was flat at $936.01, and palladium rose 1.2 per cent to $1,750.57.
Check out DH's latest videos: