Gold set for steep weekly losses, copper falls amid rate hike fears

Investing.com -- Gold prices edged lower on Friday and were set for their worst week since January, while copper prices retreated as a bumper rate hike from the Bank of England and hawkish Federal Reserve signals pushed up fears of tighter monetary conditions.

Prices of the yellow metal traded at a three-month low, having finally broken out of a tight trading range seen over the past month, albeit to the downside.

Spot gold fell 0.1% to $1,912.24 an ounce, while gold futures fell 0.1% to $1,921.60 an ounce by 22:08 ET (02:08 GMT). Both instruments were set to lose around 2.5% for the week, their worst loss since late-January.

Gold hit by BoE hike, hawkish Fed outlook

The latest catalyst for gold’s losses came from a bigger-than-expected, 50 basis point rate hike from the Bank of England, as the lender grapples with overheated inflation in the UK.

Thursday’s hike followed data showing an unexpected rise in UK inflation, with the BoE potentially hinting at more hikes later this year.

The outlook for the yellow metal also dimmed after Federal Reserve Chair Jerome Powell reiterated in testimony before Congress that the bank could hike rates at least two more times this year, as U.S. inflation continues to trend at twice the Fed’s target range.

The prospect of rising interest rates bodes poorly for gold, given that they push up the opportunity cost of holding bullion.

Markets are positioning for an over 70% chance the Fed will raise rates in July, and have wound down most bets for a rate cut this year.

A string of Fed speakers are set to speak later on Friday, potentially offering up more cues on the Fed’s plans for more rate hikes.

Other precious metals tracked losses in gold, with platinum and silver down 6.5% and 8.1% for the week, respectively.

Copper reverses weekly gains, slips on weak economic outlook

Among industrial metals, copper prices fell on Friday, extending losses from the prior session and reversing all gains made earlier in the week.

Hawkish signals from major central banks drove up concerns over slowing economic growth this year, which bodes poorly for copper, given that demand for the red metal is tied to industrial activity.

Copper futures fell 0.5% to $3.8695 a pound.

An interest rate cut in major importer China provided only a limited boost to the red metal, which was now down 0.5% for the week.