Gold Loses Ground as Further Rate Hike Bets Boost U.S. Dollar, Yields

KONTAN.CO.ID - NEW YORK. Gold prices dropped to their lowest in eight weeks on Friday, pushed down by a stronger dollar and bond yields as the market braced for more interest rate hikes by the U.S. Federal Reserve in the coming months.

U.S. inflation accelerated while the consumer spending rebounded sharply by 1.8% in January, compared to Reuters forecast of a 1.3% rebound, further reinforcing expectations that the Fed will remain hawkish.

Spot gold fell 0.5% to $1,813.39 per ounce by 11:27 a.m. ET (1627 GMT), having touched its lowest since Dec. 30, 2022, at $1,808.7.

U.S. gold futures eased 0.3% to $1,820.40.

Yields are rising after the data, while also feeding into further dollar strength, which is kryptonite for gold, said Edward Moya, senior market analyst at OANDA.

Pressuring gold, the dollar index held near two- month peak, while benchmark yields were also en route to their fifth weekly rise.

With U.S. durable goods data due next week, "manufacturing activity is expected to pick up ...you're probably going to get further evidence that the economy is not weakening, which should in theory fuel more inflation worries," Moya added.

Following a slew of strong economic data, investors have walked back expectations of a deep rate cut this year and expect U.S. rates to peak in July at 5.35% and remain above 5% until the end of the year.

Rising interest rates dull gold's appeal as they increase the opportunity cost of holding the non-yielding asset.

Tracking losses in gold, spot silver fell 1.8% to $20.91 and platinum dipped 3.4% to $915.13.

Palladium, used by automakers in catalytic converters to curb emissions, sank 4.7% to $1,381.03, after touching its lowest level since Aug. 2019 at $1,388.05.

"Palladium is not a metal that's in vogue with the emphasis shifting to metals used in electric vehicles," said Edward Meir, a metals analyst at Marex.

"I don't think palladium is getting much traction either from technicals, which are very poor as well as fundamentals which also don't look that great."