Picture: BLOOMBERG/WALDO SWIEGERS
Picture: BLOOMBERG/WALDO SWIEGERS

Bengaluru — Gold dipped on Friday, on track for its biggest weekly fall since August, as the dollar rose towards 16-month highs after the US Federal Reserve stuck to its tight monetary stance and looks set to deliver another rate hike in December.

Spot gold was 0.3% lower at $1,219.5 an ounce at 10.28am GMT, having touched its lowest since November 1 at $1,217.20. Gold is down 1% for the week so far, which would be its biggest decline since the week of August 17. US gold futures fell 0.4% to $1,220.3 an ounce.

“It is pretty clearly a dollar-related move today, which has happened since the latest decision from the US Fed,” said Capital Economics analyst Ross Strachan. The sentiment in the market “is quite cautious after recent spikes, consolidating in the $1,220 to low $1,230 levels, and not breaking out of that.”

Spot gold touched a peak of $1,243.32 on October 26, its highest since mid-July. The dollar firmed towards a 16-month high, underpinned by a robust US economy and rising interest rate environment, making bullion more expensive for holders of other currencies.

Rate increases also pressure gold prices by increasing the opportunity cost of holding non-yielding bullion.

“We remain cautious on gold here as roughly half the recent advance seems to have been rolled back in recent days on account of a stronger dollar and more resiliency in US equity markets,” said INTL FCStone analyst Edward Meir in a note.

“In addition, US interest rates seem to be on the march again ... there is not much of an upside trigger that could lead to a sustainable rally.”

The Fed held interest rates steady on Thursday, having hiked them three times this year, but remained on track to keep gradually tightening borrowing costs, even one in December because of US economic strength, rising inflation and solid jobs growth.

“We are expecting the current Fed tightening cycle to end sooner by the middle of next year ... so we are expecting gold prices to rise to $1,300 by the end of next year,” Strachan added.

Among other precious metals, silver was down 0.5% to $14.34 an ounce. The metal was headed for its biggest weekly percentage decline in nine weeks, slipping more than 2% so far.

Platinum dipped 0.9% to $856.20 an ounce. The metal was down about 1% so far for the week, its biggest fall since late September.  Palladium fell 0.4% to $1,120.24 an ounce, though it was up 0.4% for the week, set for its fourth weekly gain.

Reuters

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