NEW YORK: Gold fell on Friday and was on course to finish lower for the week in which a firming dollar and interest rate hikes from major central banks dented the safe-haven metal’s appeal.
Spot gold was down 0.8% to $1,841.78 per ounce by 12:06 p.m. EDT (1606 GMT), after falling as much as 1% earlier in the session. US gold futures fell 0.3% to $1,843.80.
Gold has lost 1.6% so far this week. Gold is giving up some gains, after a big jump on Thursday, as the dollar rose 1.2%, said RJO Futures senior market strategist Bob Haberkorn. A stronger dollar hurts gold as it makes the metal expensive for overseas buyers.
But it remains “stuck in the middle of a tug of war between inflation and interest rates,” Haberkorn added.
The Federal Reserve announced its largest rate increase since 1994 this week, while the Swiss National Bank raised its policy rate for the first time in 15 years. The Bank of England also followed suit.
“While firmer inflation on its face is bullish for (precious metal) prices, it is now being quickly counteracted by more aggressive pricing for a policy response from the Fed and other central banks, likely keeping prices constrained,” J.P. Morgan said in a note.
Higher interest rates sour the appeal of gold, traditionally a hedge against inflation, since bullion yields no interest.
But gold’s safe-haven lure is supported by rising risks of stagflation, decades-high inflation and the turmoil in risky assets, said Saxo Bank analyst Ole Hansen in a note.
That is “why gold has not fallen at the pace dictated by rising real yields,” he said.
In the physical market, gold demand from top consumer China remained tepid due to Covid-19 restrictions.
Silver fell 1.3% to $21.64 per ounce, platinum dropped 1.8% to 933.18, and palladium shed 3% to $1,822.57.