By Arundhati Sarkar
(Reuters) – Gold prices edged up on Friday, on a pullback in the dollar, but were still bound for their first weekly decline in three, weighed down by signals from U.S. central bankers that more interest rate hikes were on the way.
Spot gold inched 0.1% higher to $1,763.05 per ounce by 0633 GMT, set for a weekly decline of about 0.5%. U.S. gold futures were also 0.1% higher at $1,765.10.
Gold prices could remain volatile until there’s clear direction from the Federal Reserve, said Jigar Trivedi, an analyst with Mumbai-based Reliance Securities.
Offering some respite to gold, the dollar index, a rival safe haven, inched lower, making bullion cheaper for overseas buyers.
However, the U.S. currency was still headed for its best week in a month, as hawkish remarks from Fed officials and strong retail sales put the brakes on a pullback triggered by signs of softening inflation last week. [USD/]
Markets are currently pricing in an 87% chance of a 50-basis point hike at the Fed’s December meeting, after four straight 75-bps hikes.
Gold continues to be supported by rising recession risks, the still-evolving Ukraine war and the dollar peaking, Fitch Solutions said in a note.
“On the other hand, growing optimism towards the Chinese economy, still high risks of the Fed raising rates further and more aggressively than the market expects, and a peaking of inflation in Q3 will continue to pressure gold.”
Although gold is seen as an inflation hedge, higher interest rates and bond yields raise the opportunity cost of holding bullion. Analysts said institutional investors are wary and further gains for gold could be elusive.
Among other metals, spot silver rose 0.6% to $21.07 per ounce, while palladium eased 0.1% to $2,005.56.
Platinum fell 0.2% to $978.63 and was down about 5% for the week.
(Reporting by Arundhati Sarkar and Arpan Varghese in Bengaluru; Editing by Savio D’Souza and Sherry Jacob-Phillips)
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