Gold slides as dollar hits one-month high

Gold prices slipped to a three-week low on Friday and were set for their first weekly drop in five, as a stronger dollar and prospects of more rate hikes by the US Federal Reserve dented bullion’s appeal.

Spot gold was down 0.3% at $1,752.89/oz, at 4.51am GMT, after falling to its lowest since July 28 at $1,751.01 earlier in the session. For the week, the metal is down 2.7%. US gold futures fell 0.3% to $1,766.20/oz.

“Markets are expecting interest rates to go further up and of course the strong dollar is definitely weighing on gold prices at the moment,” said Brian Lan, MD at dealer GoldSilver Central. “Many are staying on the sidelines expecting gold prices to go further down. Also, we've seen quite a bit of liquidation on the ETF (exchange-traded fund) side.”

The dollar surged to a one-month high against its rivals, making gold more expensive for buyers holding other currencies. The Fed needs to keep raising borrowing costs to bring high inflation under control, a string of US central bank officials said on Thursday, even as they debated how fast and how high to lift them.

St Louis Fed president James Bullard said he was leaning towards supporting a third straight 75 basis point rate hike in September.

Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion.

In the July meeting minutes released on Wednesday, Fed officials said the pace of future rate hikes would depend on incoming economic data.

Data on Thursday showed the number of Americans filing new claims for unemployment benefits fell last week, suggesting labour market conditions remain tight despite a slowdown in momentum due to higher interest rates.

Spot silver fell 0.9% to $19.35/oz and was on track for its biggest weekly percentage fall since late January. Platinum fell 0.4% to $907.84 and palladium slipped 0.3% to $2,149.35.

Reuters