Gold heads for weekly loss as stronger dollar, Fed rate outlook weighs

Gold prices edged up on Friday but were on track for a weekly decline, as a stronger US dollar and anticipation of elevated interest rates from the Federal Reserve weighed on the precious metal. By midnight GMT, spot gold had climbed 0.2% to $4,288.36 per ounce, but was down 2% for the week. US gold futures also gained 0.6% to $4,323.10.

The dollar was set for a weekly rise, making metal priced in greenbacks more costly for holders of foreign currencies. The focus remained on the interest rate outlook. Analyst Kelvin Wong noted that a more hawkish Federal Reserve would strengthen the dollar and hurt gold. With Fed policymakers hinting at potential additional rate hikes to combat high inflation, expectations for persistently high interest rates intensified.

Philadelphia Fed President Anna Paulson emphasized the priority of returning inflation to 2%, while stressing a careful evaluation of labor market risks. New York Fed President John Williams echoed this sentiment, indicating tighter monetary policy was on the horizon. Despite gold's reputation as an inflation hedge, higher rates can diminish demand by boosting the appeal of yield-generating assets.

Nonetheless, Joshua Rotbart, founder of J. Rotbart & Co., expressed optimism for gold in the remainder of the year, citing ongoing geopolitical tensions and mounting sovereign debt as drivers of continuous demand for safe-haven assets. Silver slipped 0.1% to $63.81 per ounce, platinum rose 0.5% to $1,756.90, and palladium fell 1.3% to $1,257.56, all trailing for weekly losses.