Gold heads for weekly decline as dollar firms, Fed rate outlook weighs

GOLD prices eased on Friday (Sep 25) and were set for a weekly decline, pressured by a stronger dollar and growing expectations that the US Federal Reserve will keep interest rates elevated for longer to combat inflation.

Spot gold was down 0.2 per cent at US$4,270.40 per ounce, as of 0035 GMT, and has lost more than 2 per cent so far this week.

US gold futures edged 0.2 per cent higher to US$4,304.80.

The dollar is headed for a weekly gain, making greenback-priced metals more expensive for holders of other currencies.

The US central bank will likely need to raise rates again to curb unacceptably high inflation, two Fed policymakers said. This comes a week after the Fed raised its benchmark interest rate by a quarter of a percentage point.

“Returning inflation to 2 per cent is a top priority, and I will support the policy path that gets us there while carefully weighing risks to the labor market along the way,” Philadelphia Fed President Anna Paulson told a conference at her regional bank.

Meanwhile, speaking in London, New York Fed President John Williams also suggested tighter monetary policy is coming.

Although gold is traditionally seen as a hedge against inflation, higher rates can curb its demand by increasing the appeal of yield-bearing assets.

Data showed new claims for US unemployment benefits hovered near 57-year lows last week, suggesting the labour market regained momentum after struggling through much of summer and was so far weathering headwinds from the Middle East conflict.

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Spot silver slipped 0.5 per cent to US$63.58, platinum steadied at US$1,749.61 and palladium fell 1.3 per cent to US$1,257.70. REUTERS