Gold set for second straight weekly drop on worries over big rate hikes

June 24, 2022: Gold prices were flat on Friday but on course for their second straight weekly decline, with worries over major central banks potentially implementing big interest rate hikes to target runaway inflation weighing on bullion demand.

Spot gold was last up 0.1% to $1,824.72 per ounce at 0215 GMT, after hitting a one-week low of $1,820.99 earlier in the session. U.S. gold futures fell 0.2% to $1,825.90.

Gold prices have dropped about 0.9% this week.

The U.S. Federal Reserve's commitment to reining in 40-year-high inflation is "unconditional," its chair Jerome Powell told lawmakers on Thursday, even as he acknowledged that sharply higher interest rates may push up unemployment.

"The U.S. dollar remains firm and expectations now lean towards a 75-basis-points Fed hike in July. The TIPS spread – a market-based proxy for inflation expectations – is also near a 4-month low, and these have kept a lid on any gold rally," City Index senior market analyst Matt Simpson said.

A strong dollar makes greenback-priced gold more expensive for buyers holding other currencies. [USD/]

Benchmark U.S. 10-year Treasury yields firmed on Friday, limiting demand for gold. [US/]

Higher interest rates and bond yields raise the opportunity cost of holding bullion, which yields no interest.

"Gold looks vulnerable over the near-term, given its inability to break $1,850, its 200-day average, this week," Simpson said, adding "were it not for the fear of a global recession then gold would likely be lower than it already is."

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.81% to 1,063.07 tonnes on Thursday from 1,071.77 tonnes a day earlier. [GOL/ETF]

Spot silver firmed 0.4% to $21.02 per ounce, and platinum rose 0.9% to $915.11, but both were set for weekly losses.

Palladium climbed 1.4% to $1,870.29 and has gained about 3% this week.

Reuters