Gold Prices See Weekly Losses as Fed Rate Risks Rise

By Ambar Warrick

Investing.com-- Gold prices fell slightly on Friday, and were set to end the week lower as hawkish signals from the U.S. Federal Reserve on the path of U.S. interest rates drove up the dollar.

Spot gold fell 0.1% to $1,756.59 an ounce by 23:03 ET (03:03 GMT), while gold futures dipped by a similar amount to $1,769.70. Both instruments were set to lose about 2.6% this week, having fallen for all five sessions.

The dollar index was boosted by comments from Federal Reserve officials that the bank would stick to a sharp pace of rate hikes this year to bring down runaway inflation. St. Louis Fed President James Bullard on Thursday said he currently supports a third consecutive 75 basis point (bps) rate hike in September.

San Francisco Fed President Mary Daly also flagged a potential 50 to 75 bps hike during the Fed’s next meeting, with a target of keeping rates above 3% by the year-end.

Their comments came after the minutes of the Fed’s July meeting showed on Wednesday that most members of the central bank supported raising rates substantially to combat inflation.

This put the dollar on course to gain for the week, pressuring most metal prices. Rising interest rates this year have seen the dollar largely overtake gold as a preferred safe haven, sapping the yellow metal of its gains made during the onset of the Russia-Ukraine crisis.

Platinum futures fell 0.1% on Friday, while silver shed 0.8%.

Among industrial metals, copper futures fell slightly on Friday, and were set to lose over 1% this week after weak industrial production data from China.

China is the world’s largest importer of the red metal, and is currently struggling to shore up factory activity after a series of COVID-19 lockdowns.

Trouble in the country’s massive real estate market also spells more headwinds for the economy, which is likely to weigh on the prices of copper and other industrial metals in the medium term.