Gold pulls back from record peak as dollar gains

Gold dipped on Friday as the dollar strengthened, but was on track for a weekly gain after rallying to a record high in the previous session in the wake of the U.S. Federal Reserve‘s rate cut plans.

Spot gold was down 0.9% at $2,160.63 per ounce as of 2:13 p.m. EDT (1813 GMT), and was up 0.2% for the week. Prices hit a record high on Thursday after the Federal Reserve indicated it still intended to cut rates three times this year.

U.S. gold futures settled 1.1% lower at $2,160.

The dollar hit its highest in more than a month, making gold more expensive for other currency holders. [USD/]

But “as long as we have lower real rates, continued central bank buying along with retail demand and political hedging, the depth of the correction (in gold) is limited,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

Gold would need to stay above support around $2,150-$2,145 to continue its bullish momentum, Streible added. Traders are pricing in a 76% probability of a U.S. rate cut in June, according to the CME FedWatch Tool, up from 65% before the rate decision. Lower interest rates reduce the opportunity cost of holding non-yielding gold.

Investment flows into gold hit their highest in almost a year in the week to Wednesday, Bank of America Global Research said.

However, “the set-up in gold has deteriorated, with CTAs now ‘max long’, macro traders positioned in line with rates market pricing, and Shanghai traders paring back their purchases following their epic buying activity over the last months,” TD Securities said in a note.

In physical markets, jewellery stores in India wore a deserted look this week as record prices hammered appetite, but China still saw steady demand. [GOL/AS]

Silver fell 0.6% to $24.62 per ounce, platinum eased 1.6% to $893.92 and palladium lost 1.9% to $991.26. All three were on track for a weekly fall.