Gold dipped on Friday, as its appeal as an inflation hedge after hot U.S. consumer price data was outweighed by the surge in costs fuelling bets for a hefty interest rate hike from the Federal Reserve next month.
Spot gold fell 0.2% to $1,822.66 per ounce by 0633 GMT, while U.S. gold futures fell 0.7% to $1,824.50.
Gold has gained 0.8% so far this week as inflationary risks and geopolitical tensions lifted demand for the safe-haven asset.
The gold market is going to move between rate hikes and higher yields being major headwinds, and support from inflation concerns and high commodity prices, said Harshal Barot, a senior research consultant for South Asia at Metals Focus.
Pressure increased on the Fed to take a stronger stand against inflation after an unexpectedly large jump in U.S. consumer prices bolstered the view that the Fed is behind the curve.
Expectations for a firm Fed response next month drove benchmark 10-year U.S. Treasury yields to their highest level since August 2019 touched on Thursday, while also supporting the dollar, and triggering a sharp downturn in global equities.
Higher yields and interest rate hikes dent the appeal of bullion by raising the opportunity cost of holding non-interest-paying gold, while a higher dollar makes gold less attractive for overseas buyers.
Gold is holding up quite well, said IG Markets analyst Kyle Rodda, adding that “if rate markets continue to price the sort of hawkishness from the Fed – that was roughly articulated by Jim Bullard last night – the fundamentals necessitate a much lower gold price.”
Spot silver fell 1.1% to $22.93 per ounce, but is still up about 2% for the week.
Platinum was down nearly 1% to $1,016.42, and palladium fell 1.7% to $2,216.69, set for a second weekly loss.