Gold set for worst week in 5 months on hawkish Fed view

[BENGALURU] Gold was set on Friday (Nov 26) for its worst week in 5 months, as bullion prices were hammered by increasing bets that the US Federal Reserve would accelerate the pace of stimulus tapering and raise interest rates sooner to curb rising inflation.

Spot gold rose 0.2 per cent to US$1,792.62 per ounce by 12.51 am GMT. US gold futures advanced 0.5 per cent to US$1,793.90.

The metal has declined more than 2.8 per cent this week, heading for its worst week since June 18.

The dollar index was steady but not far off a 16-month peak hit earlier this week. A stronger dollar makes bullion costlier for buyers holding other currencies.

The Fed will likely double the pace of tapering its monthly bond purchases from January to US$30 billion, and wind down its pandemic-era bond buying scheme by mid-March, Goldman Sachs strategists said in a daily note on Thursday (Nov 25).

Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of gold, which pays no interest.

The European Central Bank is coming under pressure from bankers to lend more of its stash of German government bonds to avert a market squeeze that would undo some of its own stimulus efforts.

A surge in coronavirus infections in Germany and high inflation are weighing on the consumer morale in Europe's largest economy, dampening the business prospects for the upcoming Christmas shopping season, a survey showed.

China's net gold imports via Hong Kong jumped to the highest since June 2018 in October, as buyers in the top consumer stocked up on the metal as a cushion against rising inflation.

Spot silver fell 0.1 per cent to US$23.55 per ounce. Platinum dropped 0.6 per cent to US$989.77, while palladium rose 0.4 per cent to US$1,866.34.

REUTERS