PUBLISHED FRI, SEP 8 2023
Gold firmed on Friday as the dollar came off six-month highs but bullion was still en route to a weekly fall on chances of one more U.S. interest rate hikes this year.
Spot gold was up 0.2% to $1,922.94 per ounce but was set for a 0.8% weekly fall. U.S. gold futures rose 0.2% to $1,947.10.
The dollar’s strength, and a rebound in Treasury yields given expectations of the Federal Reserve raising rates in November, is pressuring gold, said Carlo Alberto De Casa, analyst at Kinesis Money.
But while “the overall scenario is very challenging,” gold is still seeing solid demand, De Casa said, adding the ECB was unlikely to raise interest rates given economic concerns.
The dollar eased 0.1% but was headed for its longest weekly winning streak in nine years, bolstered by recent strong U.S. economic data, including a drop in jobless claims.
Markets priced in an around 93% chance of the Fed keeping rates unchanged at its Sept. 19-20 meeting, but bet on 45% odds of one more hike before 2024, according to the CME FedWatch tool.
Higher rates dull appetite for zero-yield gold since they boost returns on competing safe-haven Treasury bonds, which are set for a weekly rise.
Three Fed officials on Thursday suggested the Fed could skip a rate hike in September but maintained that there was more work to be done to curb inflation.
“If the Fed ends up needing to hold longer, that becomes the worst of all possible worlds for gold because that means higher yields and a stronger dollar,” said Ilya Spivak, head of global macro at Tastylive.
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