Gold slips as chances of hefty Fed rate hike rise

February 11, 2022: Gold prices were steady on Friday, as bullion's appeal as an inflation hedge was partially capped by hawkish comments from a U.S. Federal Reserve official that ramped up odds for a hefty interest rate hike next month and also lifted Treasury yields.

Spot gold XAU= held its ground at $1,825.62 per ounce, as of 0328 GMT, while U.S. gold futures GCv1 fell 0.6% to $1,826.40.

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.

U.S. 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 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 U.S. Treasury yields hovered close to their highest level since Aug. 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.

Among other metals, spot silver fell 0.3% to $23.10 per ounce, but is still up about 2.7% for the week.

Platinum was down 0.4% at $1,022.03, and palladium dropped 0.9% to $2,235.52, set for a second weekly loss.

Reuters