Gold prices edged higher on Friday after the dollar took a breather, although bullion was headed for a second straight weekly drop as the US Federal Reserve’s hawkish policy narrative clouded outlook for the non-yielding asset.
Spot gold was up 0.4% at $1,635.71 per ounce, as of 0243 GMT, but lost 0.4% so far this week.
US gold futures rose 0.5% to $1,638.20. The dollar index was down 0.2%, but poised for its biggest weekly gain in more than a month.
US Treasury yields hovered slightly above the 4% mark.
The Fed raised interest rates by 75 basis points on Wednesday and Chair Jerome Powell pledged to “keep at” their battle to beat down inflation.
Hawkish remarks by Powell weighed on gold, and as to how far Fed’s peak rate may go, that is still an uncertainty and markets are reflecting that caution, said Christopher Wong, OCBC FX strategist.
Gold is considered an inflation hedge, but high interest rates dent the non-yielding asset’s appeal.
“Rising yield and dollar are likely to remain headwinds for the precious metal until the Fed turns dovish,” said ANZ in a note.
Investors’ focus has shifted to the US non-farm payrolls data, due at 1230 GMT, which could offer further cues on the Fed’s rate-hike stance.
On payrolls, an upside surprise to data would reinforce Fed’s higher terminal rate posture and keep gold undermined but if we do get a deceleration in job gains, gold may find support, said Wong.
Meanwhile, data released on Thursday showed that the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting the labour market remains strong despite slowing domestic demand.
Spot silver rose 0.4% to $19.54, platinum was flat at $918.68 and palladium gained 0.6% to $1,811.92.