Gold poised for best week in 3 months on Fed pause bets

Gold prices eased on Friday but were on track for their biggest weekly gain since April, after signs of slowing U.S. inflation raised expectations of a pause in Federal Reserve’s interest rate hikes after this month.

Spot gold fell 0.1% to $1,959.27 per ounce by 01:45 p.m. EDT (1745 GMT), but has gained about 1.8% so far this week. U.S. gold futures settled little changed at $1,964.40.

Bullion hit its highest since June 16 earlier this week after data showed U.S. consumer prices in June registered their smallest annual increase in over two years, prompting bets the Federal Reserve could soon end its rate-hike cycle.

“With inflation backing off, anticipation of further rate hikes has slightly declined, helping gold this week. But, prices are lower today as yields are ticking up,” said Daniel Pavilonis, senior market strategist at RJO Futures.

“Prices are going to be range-bound near term. If the Fed begins to say we don’t need to raise rates any further, we can see gold rise further.”

Benchmark U.S. yields edged up, making non-yielding bullion less attractive to investors.
But cushioning the fall in gold prices, the dollar was on track for its biggest weekly decline since November. On Thursday, Fed Governor Christopher Waller said he was not ready to call an all-clear on inflation and favours rate hikes this year – the sentiment reflected in June’s FOMC minutes.

Higher interest rates increase the opportunity cost of holding zero-yield gold.

On the physical front, Indian dealers offered discounts on physical gold purchases for a third straight week as high domestic prices dented retail demand. [GOL/AS]

The United Arab Emirates removed refinery Emirates Gold from its “good delivery” list certification scheme, the government website showed.

Silver rose 0.4% to $24.95 per ounce, headed for its best week since mid-March.

Platinum was up 0.1% at $974.03 and palladium dropped 1.4% to $1,277.18, but both were poised for a second consecutive weekly rise.