Gold prices languished on Friday near the lowest level in more than two years, set for their worst week in two months, as prospects of aggressive rate hikes by the US Federal Reserve lifted bond yields and took the shine off bullion.

Spot gold was flat at $1,663.96 per ounce, as of 0420 GMT, after hitting its lowest since April 2020 at $1,659.47 on Thursday. Prices were down 3.1% for the week so far.

US gold futures fell 0.2% to $1,673.20.

“Currently, gold seems to be in an attempt to stabilise, coming after the heavy sell-off overnight,” said Yeap Jun Rong, a market strategist at IG.

“The bearish momentum could continue to drive a drift lower in prices until the FOMC (Federal Open Market Committee) meeting next week, where a hawkish Fed is the likely outcome.”

Spot gold hits lowest level since March 2021

Benchmark 10-year US Treasury yields hovered near their highest level since June, while the dollar was heading for a weekly rise against its rivals.

Markets are pricing in a 75-basis-point rate hike by the US central bank at its Sept. 20-21 policy meeting after consumer prices unexpectedly rose in August.

Data on Thursday showed that US retail sales unexpectedly rose in August as lower gasoline prices supported spending, while US jobless claims fell last week.

“A 75-bp hike is fully baked in, so what everyone wants to know is whether the Fed will retain an aggressive rate of tightening as we head into 2023. Gold is likely to suffer with a hawkish hike,” said Matt Simpson, a senior market analyst at City Index.

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

Meanwhile, India on Thursday slashed the base import prices of gold.

Spot silver traded flat at $19.17 per ounce. Platinum fell 0.2% to $902.33 while palladium was down 0.3% at $2,129.97.