Gold steadied on Friday, with U.S. jobs data due later in the day, even as the metal was set for its biggest weekly drop since late November, weighed down by firmer bond yields as traders braced for sooner-than-anticipated rate hikes by the Federal Reserve.
Spot gold was little changed at $1,789.60 per ounce by 0646 GMT after two straight sessions of falls, putting it on course for a weekly dip of about 2.2%.
U.S. gold futures were little changed at $1,788.80.
“Markets are increasingly pricing in an aggressive Fed … the whole prospect of Fed trying to control an inflation outbreak is obviously lifting yields,” IG Markets analyst Kyle Rodda said.
Traders are anticipating a greater than 70% chance for a rate hike of at least 25 basis points at the Fed’s March meeting, according to the CME FedWatch Tool, as even the most dovish of U.S. central bankers felt the need to tighten policy this year.
Benchmark U.S. 10-year Treasury yields steadied near their strongest level since March 2021, while 10-year TIPS yields hit June 2021 highs. Higher yields raise the opportunity cost of holding gold.
Bullion is considered an inflationary hedge, but the metal is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion.
Investor focus will be on the U.S. non-farm payrolls report due at 1330 GMT.
“A number above 550/600k will reinforce the Fed tightening faster narrative and weigh on gold. A number lower than 250k will ease those concerns and provide some support for gold,” Jeffrey Halley, a senior market analyst at OANDA, said.
Spot silver fell 0.3% to $22.08 an ounce, platinum fell 0.2% to $963.07, and palladium dipped 0.4% to $1,866.68.