Gold (XAU/USD) prices trade above $1,955 an ounce on Friday after gaining 0.9% in the previous session, benefiting mainly from the dollar’s weakness as the Federal Reserve paused its tightening campaign at a time other major central banks are still raising interest rates.
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Still, the yellow metal remains close to three-month lows as the Fed hinted at two more quarter-point rate increases this year, while the European Central Bank delivered another 25 basis point rate hike on Thursday and signaled further tightening.
The Bank of England is also set to raise rates again at its June policy meeting, a month marked by surprise rate increases from the Reserve Bank of Australia and the Bank of Canada.
Meanwhile, the People’s Bank of China lowered key short-term interest rates this week for the first time in ten months, while the Bank of Japan maintained its ultra-easy monetary policy on Friday.
Gold listless as markets assess recent US data and Fed cues
KEY POINTS:
- Palladium set for best week since April
- Silver, platinum down for the week
- Traders see 72% chance of 25-bp Fed rate hike in July
Gold prices moved in a tight range on Friday as traders weighed recent U.S. economic data and hawkish signals from the Federal Reserve, while a relatively softer dollar provided some support to bullion.
Spot gold was flat at $1,957.84 per ounce by 0238 GMT. U.S. gold futures (Yellow Metal) too were listless at $1,970.30.
Bullion tumbled to a three-month low on Thursday before reversing course to finish higher after U.S. economic data offered some respite from the Fed’s “hawkish pause” on rate hikes.
“Gold is struggling to move higher because the Fed’s message on inflation and interest rates still remains hawkish. So, it’s sort of removing the incentive to buy gold because there are more interest rate increases on the horizon,” said Edward Meir, a metals analyst at Marex.
While gold is considered a safe haven during economic uncertainties, higher interest rates dull the appeal for zero-yield bullion.
Traders are now pricing in a 72% chance of a 25-basis point rate hike in July, after the Fed signalled in new projections that borrowing costs might still need to rise by as much as half a percentage point by year-end.
The dollar index (DXY) held close to a one-month low, making gold less expensive for buyers holding other currencies.
In the next two weeks, gold could trade in the $1,931- $2,000 range, with stiff resistance seen at the upper end, Meir added.
The Bank of Japan, meanwhile, maintained its ultra-easy monetary policy despite stronger-than-expected inflation, as it focuses on supporting a fragile economic recovery amid a sharp slowdown in global growth.
Spot silver advanced 0.2% to $23.9098 per ounce and platinum ticked higher 0.1% to $986.86. But both metals were headed for a weekly loss.
