Gold set for third weekly fall on dollar strength, aggressive rate hikes

Gold prices edged lower on Friday, and were on track for a third straight weekly decline, as aggressive monetary policies from top central banks and an elevated US dollar kept investors away from greenback-priced bullion.

Spot gold was down 0.2 per cent at $1,804.26 per ounce, as of 0258 GMT, after hitting an over six-week low of $1,801.50 in the previous session.

US gold futures dipped 0.1 per cent to$1,805.00.

Gold prices, coming off their worst quarter since early 2021, have lost about 1.2 per cent this week.

Gold, catching a downdraft from the deflated commodity super-cycle thanks to front-loaded Federal Reserve rate hikes and a still strong US dollar, is underperforming despite lower Treasury yields, said Stephen Innes, managing partner at SPI Asset Management.

The dollar was steady near recent two-decade peaks, continuing to make gold less attractive for buyers holding other currencies.

Benchmark US 10-year Treasury yields hovered near their lowest level since June 7 hit on Thursday. Investor preference for cash and wealth preservation could very well see gold lower before what should be an expected recovery when recession hits and central banks need to ease, Innes said.

New US data for May showed little immediate relief from the record pace of inflation pushing the Fed towards another oversized interest rate increase next month, but it did add to a developing sense that the worst may be over. Higher interest rates and bond yields raise the opportunity cost of holding bullion, which yields nothing.

Spot gold may break a support at $1,801 per ounce and fall to $1,784, according to Reuters' technical analyst Wang Tao. Spot silver eased 0.4 per cent to $20.16 per ounce, and has dropped about 4.5 per cent this week, its most since mid-May. Platinum rose 0.3 per cent to $896.30, yet faces a fourth consecutive weekly fall. Palladium dropped 0.4 per cent to $1,930.08, but has gained about 2.8 per cent this week.