Gold marks weekly dip on looming rate hikes, dollar rally

  • Spot gold hits two-week trough
  • Silver on track for biggest weekly drop since late January

April 22 (Reuters) - Gold fell 1% on Friday and was set for its biggest weekly decline since mid-March as signs of faster policy tightening by the Federal Reserve lifted Treasury yields and the dollar.

Spot gold was down 0.9% to $1,934.06 per ounce by 2:26 p.m. EDT (1826 GMT), having earlier touched its lowest level in two weeks. The metal has lost 2.1% so far this week.

U.S. gold futures settled down 0.7% at $1,934.3.

"The safe-haven metals need a fresh fundamental spark to heighten investor and trader concern, and it's just not happening. The sideways grind that we've seen ... has invited some chart-based selling," Kitco senior analyst Jim Wycoff said.

Fed Chair Jerome Powell said on Thursday a half-percentage-point interest rate increase "will be on the table" when the U.S. central bank meets in May, suggesting it may use aggressive actions to tame soaring inflation. read more

The hawkish tone helped the benchmark U.S. 10-year Treasury yields extend gains and also boosted the dollar index

Although bullion is considered a safe-haven asset during periods of soaring inflation, a hike in interest rates to rein in the rising prices increases the opportunity cost of holding non-yielding bullion.

"Despite its recent lackluster price performance, gold nevertheless continues to attract demand from asset managers seeking protection against rising inflation, lower growth, geopolitical uncertainties, as well as elevated volatility in stocks and not least bonds," Saxo Bank analyst Ole Hansen said in a note.

In the physical bullion market, gold dealers in India reduced discounts this week as demand picked up slightly after prices eased, while activity in top consumer China was still muted by COVID-induced curbs.

Spot silver fell 1.6% to $24.24 per ounce, headed for its biggest weekly fall since late January, down around 5.6%.

Platinum fell 3.9% to $930.04 per ounce and palladium shed 1.7% to $2,381.03.

Reporting by Seher Dareen and Eileen Soreng in Bengaluru; Editing by Elaine Hardcastle, Aditya Soni and Paul Simao

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Seher oversees and writes market reports with the commodities and energy team in Bangalore round-the-clock and monitors newsworthy events in the resources space.