Gold on track for weekly loss as Fed hike bets rise, dollar weighs

Gold prices edged higher on Friday, but remained on track for a weekly decline, dented by strength in the U.S. dollar and expectations for further Federal Reserve rate hikes aimed at corraling inflation. 

At 09:32 ET (13:32 GMT), spot gold had risen by 0.1% to $4,277.76 an ounce, while gold futures rose 0.3% to $4,312.67 an ounce.

The U.S. dollar index, which tracks the greenback against a basket of currency peers, had ticked down 0.3% to 100.96. Over the last one-week period, the index has climbed by 0.9%. A firmer dollar can weigh on gold by making it more expensive for overseas buyers.

Meanwhile, oil prices dipped after surging on Thursday. Negotiators were reportedly exploring a phased agreement that would allow Iran to reopen the Strait of Hormuz in exchange for the lifting of a U.S. naval blockade. The prospect of more disruption to energy flows has kept oil prices elevated and raised concerns that higher fuel costs could drive up inflation.

That has become for gold, as investors assess whether energy-price pressures could force the Fed to tighten policy further after last week’s rate increase, its first hike in three years.

Higher interest rates and bond yields generally weigh on gold because the metal does not offer interest income. U.S. Treasury yields rose sharply Thursday, with the 30 year yield approaching its highest level in more than two decades.

Yet ANZ analysts said investment demand for gold has stayed resilient, with no material liquidation so far, despite increasingly challenging macroeconomic conditions. Still, the near-term direction for gold remains closely tied to oil prices, Treasury yields and expectations for the Fed’s next moves.