Gold dips on dollar advance, Fed’s rate-hike prospects

Gold prices fell on Friday and were set for a weekly drop, as a firmer dollar and worries of more interest rate hikes by the U.S. Federal Reserve clouded the outlook for non-yielding bullion.

FUNDAMENTALS

* Spot gold was down 0.3% at $1,832.42 per ounce, as of 0051 GMT. Bullion has fallen 1.7% this week. U.S. gold futures fell 0.6% to $1,841.00.

* The dollar index was up 0.1%. Gold competes with the dollar as a safe store of value, and gains in the currency also make bullion unattractive for overseas buyers.

* Two Fed officials said on Thursday the U.S. central bank likely should have lifted interest rates more than it did earlier this month, and warned that additional hikes in borrowing costs are essential to lower inflation back to desired levels.

* Money markets are now expecting benchmark rates to rise above 5% by May and stay at those levels through the year.

* Gold is known as a safe investment amid inflation woes, but high interest rates increase the opportunity cost of holding non-yielding bullion.
* Data on Thursday showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week.
* Data from the Labor Department showed monthly producer prices accelerating in January. The producer price index for final demand rebounded 0.7% last month after decreasing 0.2% in December.

* The yield on 10-year Treasury notes rose to its highest level since late December.

* Spot silver lost 0.6% to $21.48 per ounce, platinum fell 0.4% to $916.66 and palladium shed 0.6% to $1,501.09.

DATA/EVENTS (GMT)

0700 UK Retail Sales MM, YY Jan

0700 UK Retail Sales Ex-Fuel MM Jan

0745 France CPI (EU Norm) Final MM, YY Jan

1330 US Import Prices YY Jan