Gold prices set for worst week in 4-1/2 months on hawkish Fed

Gold prices on Friday were on track for their biggest weekly drop since February as prospects of additional interest rate hikes by the U.S. Federal Reserve this year weighed on bullion’s appeal.

FUNDAMENTALS

* Spot gold was up 0.1% at $1,915.39 per ounce by 0040 GMT, although prices hovered close to a three-month low. U.S. gold futures held steady at $1,925.10.

* Bullion, however, was down 2.2% for the week.

* The dollar index held firm, set for a weekly gain, making gold less attractive for overseas investors.

* Fed Chair Jerome Powell in his second day of testimony said the U.S. central bank would move interest rates at a “careful pace” from here as policymakers edge towards a stopping point for their historic round of monetary policy tightening.
* Separately, Fed Governor Michelle Bowman said at an event that “additional policy rate increases” will be needed to control inflation. * Investors now expect rate hikes to resume in July, after the U.S. central bank held rates steady at the June meeting.

* U.S. jobless claims, meanwhile, held steady at a 20-month high last week, potentially signalling a softening labour market in the face of the Fed’s aggressive rate hikes.

* Elsewhere, Japan’s core consumer prices in May rose 3.2% from a year earlier, data showed on Friday, while manufacturing activity fell back into contraction in June and service sector growth slowed for the first time in seven months.

* Spot silver and platinum were down 0.1% each to $22.2223 per ounce and $921.88, respectively.

* Palladium steadied at $1,284.36 after hitting its lowest since May 2019 in the previous session. DATA/EVENTS (GMT)