Gold faces first weekly loss in four on dwindling rate cut bets

Gold prices held steady on Friday as they looked set to log their first weekly drop in four as investor hopes of a U.S. interest rate cut in June took a hit after data over the week showed bubbling price pressures.

Spot gold was little changed at $2,163.10 per ounce, as of 10:17 a.m. EDT (1417 GMT). Bullion was headed for a weekly drop of 0.6%, its first since mid-February after hitting a record high of $2,194.99 last week.

U.S. gold futures were also flat at $2,167.40.

Data this week showed that U.S. consumer prices increased above expectations in February and producer prices also showed some stickiness in inflation.

“Gold has already priced in whatever positive boost it would get from expectations that interest rates are going down… if inflation starts to kick higher again, it means that policymakers are going to have to keep monetary policy more restrictive for longer,” said Everett Millman, chief market analyst at Gainesville Coins.

“Although gold does not particularly like a high interest rate environment, if the reasons for interest rates to stay that high is because inflation is running hot… that naturally means people will again turn to gold,” Millman added. Higher-than-expected inflation keeps more pressure on the Fed to keep interest rates elevated, weighing on gold. The precious metal is also used as a hedge against inflation. Traders continue to bet on interest rate cuts in June, although chances of rates easing in June are now seen at 56%, compared with 72% before the CPI data, CME FedWatch Tool showed.

The U.S. dollar index headed for its largest weekly gain since mid-January. A firmer dollar makes gold more expensive for holders of other currencies.

Spot platinum rose 1.8% to $944.19 per ounce, palladium gained 1.4% to $1,083.93, while silver was up 2% at $25.30. All three metals were poised to post a weekly gain.