Gold prices dip, set for 2% weekly loss amid hawkish Fedspeak

Investing.com-- Gold prices fell slightly on Friday and were set for steep weekly losses after a string of hawkish comments from Federal Reserve officials saw markets rethink bets for a pause in more interest rate hikes. 

Diminishing safe haven demand, in the face of waning concerns over the Israel-Hamas war, also kept appetite for gold largely muted. 

After a 10% jump in October, gold prices were hit with a heavy degree of profit taking in early-November, pulling the yellow metal to over three-week lows this week. But prices still remained around the mid-$1900 mark.

Spot gold fell 0.1% to $1,957.01 an ounce, while gold futures expiring in December fell 0.4% to $1,961.90 an ounce by 00:11 ET (05:11 GMT). Both instruments were set to lose about 2% this week- their worst week since late-September. 

Still, gold prices had seen some gains on Thursday after a disappointing Treasury auction spurred more selling in government bonds, with some traders pivoting into gold. But a corresponding spike in Treasury yields kept any gains in gold limited. 

Hawkish Powell pushes up dollar, yields 

The dollar rebounded from six-week lows this week, following a string of hawkish comments from Fed officials. Chair Jerome Powell warned on Thursday that the Fed remained unconvinced that monetary policy remained sufficiently restrictive, and also warned that sticky inflation could invite more rate hikes. 

His comments came on the heels of several similar comments from other Fed officials, which had chipped away at gold prices through the week. 

Expectations for an end to the Fed’s rate hike cycle rose substantially last week after traders interpreted Powell’s comments at a meeting as seemingly less hawkish. While a bulk of these bets still persisted, markets now grew less confident that the bank will trim rates by a wide margin in 2024.

High interest rates bode poorly for gold, given that they push up the opportunity cost of investing in bullion. This trade has kept any major gains in gold limited, and with the Fed set to keep rates higher for longer, the near-term outlook for the yellow metal remained uncertain. 

Copper set for weekly losses as China sentiment worsens 

Among industrial metals, copper prices fell slightly on Friday, and were headed for their first weekly loss in three after a string of disappointing economic readings from China.

Copper futures expiring in December fell 0.1% to $3.6303 a pound, and were set to lose 1.4% this week.

China- the world’s biggest copper importer- slipped into disinflation territory for the second time this year, data showed on Thursday. This data was preceded by disappointing trade readings, which pointed to more headwinds for China’s biggest economic engines.