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DHAKA: Gold prices edged higher on Friday but remained on track for a significant weekly decline as a stronger U.S. dollar and expectations that the Federal Reserve may keep interest rates high for longer weighed on the precious metal.
As of 8 a.m. Bangladesh time, spot gold was up 0.2% at $4,288.36 an ounce, but was down about 2% for the week. U.S. gold futures rose 0.6% to $4,323.10 an ounce.
The U.S. dollar was also heading for a weekly gain, making dollar-priced gold more expensive for holders of other currencies. Rising U.S. Treasury yields added further pressure on the metal.
“Markets will be focused on the interest-rate outlook,” said Kelvin Wong, senior market analyst at OANDA. Expectations of a more hawkish Federal Reserve tend to strengthen the dollar, which weighs on gold prices, he said.
Expectations that U.S. interest rates will remain elevated for longer have increased after two Federal Reserve policymakers said further rate increases may be needed to bring inflation under control. The Fed raised its policy rate by a quarter of a percentage point last week.
Philadelphia Fed President Anna Paulson said bringing inflation back to the 2% target remained the top priority and that she would support whatever policy path was necessary to achieve that goal, while also taking labor-market risks into consideration. New York Fed President John Williams has also signaled support for a tighter monetary policy stance.
Gold is traditionally viewed as a hedge against inflation. However, higher interest rates increase the appeal of interest-bearing assets, potentially reducing demand for gold, which does not pay interest.
Joshua Rothbart, founder of J. Rothbart & Co., said he remained positive on gold for the rest of the year, citing ongoing geopolitical tensions and rising government debt as factors likely to support demand for the metal as a safe-haven asset. Source: Reuters
