Gold holds steady, on track for weekly gain

Bengaluru — Gold prices were steady on Friday, as bullion’s appeal as an inflation hedge was partially capped by hawkish comments from a US Federal Reserve official that ramped up odds for a hefty interest rate hike next month and also lifted Treasury yields.

Spot gold held its ground at $1,825.62/oz at 3.28am GMT, while US gold futures fell 0.6% to $1,826.40/oz. Gold gained 1% so far this week, the highest since early January, as inflationary risks and geopolitical tensions lifted demand for the safe-haven asset.

US consumer prices rose solidly in January, leading to the biggest annual increase in inflation in 40 years, fuelling speculation for a 50-basis-point rate hike from the Fed in March.

Gold is holding up quite well, said IG Markets analyst Kyle Rodda, adding that “if rate markets continue to price the sort of hawkishness from the Fed — that was roughly articulated by Jim Bullard [Federal Reserve Bank of St Louis president] last night — the fundamentals necessitate a much lower gold price.”

Rate futures showed a nearly 68% chance that the Fed will aggressively raise interest rates in March. Benchmark 10-year US Treasury yields hovered close to their highest level since August 2019 touched on Thursday. Higher yields and interest rate hikes dent the appeal of bullion by raising the opportunity cost of holding non-interest-paying gold.

Russia and Ukraine said they had failed to reach any breakthrough in a day of talks with French and German officials, while Britain said the “most dangerous moment” in the West’s standoff with Moscow appeared imminent, as Russia held military exercises in Belarus.

Among other metals, spot silver fell 0.3% to $23.10/oz, but is still up about 2.7% for the week. Platinum was down 0.4% at $1,022.03/oz and palladium dropped 0.9% to $2,235.52/oz, set for a second weekly loss.

Reuters