Gold bars and dollar bills are pictured in a safe in a bank in Vienna. Picture: REUTERS/HEINZ-PETER BADER
Gold bars and dollar bills are pictured in a safe in a bank in Vienna. Picture: REUTERS/HEINZ-PETER BADER

Bengaluru — Gold prices fell to their lowest in a week on Friday, and were set for their biggest weekly fall since August, on a firmer dollar as the US Federal Reserve indicated it will continue to raise interest rates, lowering demand for bullion.

Spot gold fell 0.4% to $1,218.23/oz at 3.57am GMT, having touched its lowest level since November 1 at $1,218.08.

Gold was down 1.2% for the week, its biggest weekly decline since the week of August 17.

US gold futures fell 0.3 percent to $1,221.70/oz.

“Gold has come under pressure because of a stronger dollar. Also the FOMC [Federal open market committee] meeting showed no change in the interest rates. Market sentiment from here could be bearish for gold,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

The dollar gained against its major peers on Friday as the Fed on Thursday kept interest rates steady but reaffirmed its monetary tightening stance.

Higher interest rates raise the opportunity costs of holding gold, which does not pay interest and incurs costs to store and insure.

The dollar index, which measures the greenback against a basket of six major currencies, climbed about 0.8% in the previous session.

“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, U.S. 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 has hiked rates three times this year and is widely expected to do so again in December because of a robust US economy, rising inflation and solid jobs growth.

Spot gold is expected to test a support at $1,211/oz, with a good chance of breaking below this level and falling more to $1,202, said Reuters technical analyst Wang Tao.

Among other precious metals, silver fell 0.6% to $14.32/oz. The metal was headed for its biggest weekly percentage decline in nine weeks, slipping about 2% so far.

Platinum dipped 1.2% to $853.45/oz, its lowest level in a week. The metal was down about 1% so far for the week, its biggest fall since late September.

Palladium was down about 0.3% to $1,120.60/oz, although it was up 0.6% for the week, set for its fourth weekly gain.