Gold firms on weaker dollar, yet limited by Fed rate hike path

Gold rose on Friday as the dollar hovered near a month’s low, but expectations of more U.S. interest rate hikes this year capped gains.

Spot gold gained 0.5% to $1,967.29 per ounce by 1217 GMT, en route a 0.3% advance for the week. U.S. gold futures was up 0.4% to $1,978.20.

“The market turned a little wiser this week – it wants to stay long gold, and price weakness is being used as a buying opportunity along with the emerging belief that incoming data is unlikely to support the projection of two more hikes before year-end,” said Ole Hansen, head of commodity strategy at Saxo Bank.

After the Federal Reserve signalled on Wednesday that borrowing costs might still need to rise by the year-end, traders see a 74% chance of a 25-basis-point rate hike in July being the only rate hike in 2023, the CME’s FedWatch tool showed.

Higher interest rates dull the appeal of zero-yield bullion.

But driving a rebound in bullion in the previous session, U.S. initial jobless claims were unchanged at 262,000 for last week, while industrial output dropped 0.2% in May.
Meanwhile, holdings in SPDR Gold Trust – the world’s largest gold-backed exchange-traded fund – saw outflows for most of this week. This was “simply because gold is very boring compared to the stock market,” Hansen added. [GOL/ETF]

Global shares rose to 14-month highs . [MKTS/GLOB]

The dollar index hovered close to a one-month low, with the euro touching a one-month high against the dollar, making it less attractive. [USD/]

A weaker dollar makes gold less expensive for overseas buyers.

“We anticipate gold price volatility to continue as traders assess the longer term trends of U.S. interest rate paths, inflation dynamics, and euro strength,” said analysts at investment bank SP Angel.

Silver gained 1.4% to $24.20 per ounce, while platinum rose 0.9% to $994.15 , both down for the week.

Palladium fell 0.2% to $1,396.62, yet was seeing its biggest weekly gain since mid-April