Gold set for fifth weekly loss on dollar surge, rate-hike fears

Gold inched higher on Friday, as the dollar rally eased, although the greenback's remarkable performance overall and fears of aggressive US interest rate hikes weighed on demand for bullion and set prices for a fifth straight weekly loss.

Spot gold was up 0.2 per cent at $1,713.04 per ounce, as of 0252 GMT, but has lost 1.6 per cent so far this week. US gold futures rose 0.4 per cent to $1,712.10. "Gold has wilted in the face of a stronger U.S. dollar this week, but appears to be trying to form a temporary base ahead of $1,700.00. That said, it is displaying no signs of meaningful upside momentum with rallies limited to the $1,750.00 region," OANDA senior analyst Jeffrey Halley said.

Also Read | US Dollar pauses for breath as Fed officials leave market pondering over rates path

The dollar edged off recent 20-year highs, easing some pressure on demand for greenback-priced gold among overseas investors, after sending bullion over 2 per cent lower on Thursday. "In the bigger technical picture, gold still looks vulnerable, with risks skewed to the downside," Halley said. Two of the US Federal Reserve's most hawkish policymakers said on Thursday they favoured another 75-basis-point interest rate increase at the central bank's policy meeting this month, not the bigger rate hike traders had raced to price in after a report Wednesday showed inflation was accelerating.

Higher interest rates and bond yields raise the opportunity cost of holding non-yielding bullion. Benchmark US 10-year Treasury yields edged lower on Friday, buoying gold. "Investment demand for gold is weakening," ANZ Research said in a note, adding that gold will remain under pressure from expectations of a large Fed rate hike.

Spot silver dipped 0.1 per cent to $18.36 per ounce, but has fallen about 4.9 per cent in what could be its seventh straight weekly loss. Platinum gained 0.5 per cent to $847.36. It has dropped about 5.5 per cent this week, the most in three months. Palladium rose 0.8 per cent to $1,911.45, but lost about 12.4 per cent this week, the most since last November.