Gold eked out gains on Friday but was set for its first weekly drop in four weeks, as surprisingly hot U.S. inflation readings prompted traders to re-think on how swiftly and deeply the Federal Reserve could cut interest rates.
Spot gold rose 0.3 percent at $2,167.72 per ounce, as of 0657 GMT, but was on track for a weekly drop of about 0.5 percent, its first since mid-February.
U.S. gold futures edged 0.2 percent up at $2,172.10.
“It’s hard to ignore the upside surprise from inflation now … I don’t see any fresh catalysts to propel gold above a major resistance of $2,200 in the short term,” InProved precious metals trader Hugo Pascal said.
U.S. producer prices increased more than expected in February. Consumer inflation also showed some stickiness in inflation.
Higher inflation adds pressure on the Fed to keep interest rates elevated, weighing on non-yielding assets such as gold, and increasing appeal for bonds and lifting the dollar.
Ten-year Treasury yields rose nearly 20 basis points to 4.2786 percent this week, and the dollar index gained about 0.7 percent, set for its largest weekly gain since mid-January.
A firmer U.S. dollar makes gold more expensive for other currency holders.
Traders have tempered the chances of a rate cut at the Fed’s June meeting to 61 percent, from about 75 percent last Friday, according to LSEG’s rate probability app. For 2024, market sees about three rate cuts, down from between three to four last Friday.
Spot gold is biased to bounce into a range of $2,169-$2,175 per ounce, as it stabilized again around support at $2,152, according to Reuters market analyst Wang Tao.Spot platinum rose 0.4 percent to $930.90 per ounce, palladium dropped 1 percent to $1,080.19, while silver was up 1.1 percent at $25.09. All three metals were poised to post a weekly gain.
