Gold set for weekly rise on Fed rate pause expectations

Gold prices edged lower on Friday after climbing more than 1 per cent in the previous session, although hopes of a likely pause on interest rate hikes by the US central bank kept bullion on track for a weekly gain.

Spot gold was down 0.2 per cent to $1,964.79 per ounce by 0304 GMT, but headed for a 0.9 per cent weekly rise. US gold futures held steady at $1,979.80. The initial jobless claims numbers gave further weight to the case for a June pause from the Fed, and the resulting pullback in treasury yields have allowed the gold price to pop higher, Tim Waterer, Chief market analyst at KCM Trade.

The slight pullback is natural after a spike higher in terms of price consolidation and some profit-taking, he added. The dollar index hovered close to the previous session's lows. A weaker dollar makes gold less expensive for overseas buyers. Focus now shifts to the US consumer inflation report for May, due on June 13, ahead of the Fed meeting, which will provide investors with more clarity about the health of the world's largest economy.

The International Monetary Fund on Thursday urged the US Federal Reserve and other global central banks to "stay the course" on monetary policy and remain vigilant in combating inflation.

The overall trend in gold remains positive and prices are waiting for another trigger to move higher, said Kunal Shah, head of research at Nirmal Bang Commodities in Mumbai. Markets are pricing in a 71.3 per cent chance of the Fed standing pat next week, after having raised at every meeting since March 2022.

Still, the odds of a 25 basis point rate hike in July are now 51 per cent. Rate hikes raise the opportunity cost of holding non-yielding bullion. Spot silver rose 0.4 per cent to $24.3387, palladium was up 0.3 per cent to $1,365.39. Platinum advanced 0.5 per cent to $1,015.48, and was set to snap two consecutive weeks of declines.