Gold dips on dollar advance, Fed’s rate-hike prospects

GOLD prices fell on Friday (Feb 17) and were set for a weekly drop, as a firmer dollar and worries of more interest rate hikes by the US Federal Reserve clouded the outlook for non-yielding bullion.

Spot gold was down 0.3 per cent at US$1,832.42 per ounce, as of 0051 GMT. Bullion has fallen 1.7 per cent this week. US gold futures fell 0.6 per cent to US$1,841.00.

The dollar index was up 0.1 per cent. Gold competes with the dollar as a safe store of value, and gains in the currency also make bullion unattractive for overseas buyers.

Two Fed officials said on Thursday the US central bank likely should have lifted interest rates more than it did earlier this month, and warned that additional hikes in borrowing costs are essential to lower inflation back to desired levels.

Money markets are now expecting benchmark rates to rise above 5 per cent by May and stay at those levels through the year.

Gold is known as a safe investment amid inflation woes, but high-interest rates increase the opportunity cost of holding non-yielding bullion.

Data on Thursday showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week.

Data from the Labour Department showed monthly producer prices accelerating in January. The producer price index for final demand rebounded 0.7 per cent last month after decreasing 0.2 per cent in December.

The yield on 10-year Treasury notes rose to its highest level since late December.

SEE ALSO

Gold eases as bets for more Fed rate hikes blunt appeal

Spot silver lost 0.6 per cent to US$21.48 per ounce, platinum fell 0.4 per cent to US$916.66 and palladium shed 0.6 per cent to US$1,501.09. REUTERS