Gold eases on firmer dollar, rate-hike fears

GOLD prices ticked lower on Monday (Mar 6) as the dollar firmed, with a fresh set of data cementing fears that central banks across the globe would keep raising rates to contain sticky inflation.

Spot gold was down 0.1 per cent at US$1,853.19 per ounce, as of 0037 GMT, after climbing to its highest since Feb 15 on Friday. US gold futures rose 0.3 per cent to US$1,859.60.

The dollar index edged higher, making bullion less affordable for buyers holding other currencies.

Data on Friday showed the US services sector grew at a steady clip in February, with new orders and employment rising to more than one-year highs, suggesting the economy continued to expand in the first quarter.

San Francisco Federal Reserve president Mary Daly said on Saturday if data on inflation and the labour market continued to come in hotter than expected, interest rates would need to go higher, and stay there longer than Fed policymakers had projected in December.

Richmond Fed president Thomas Barkin said on Friday he could envision a scenario where the central bank pushes the US benchmark policy interest rate to the 5.5-5.75 per cent range.

Money markets expect the Fed’s target rate to peak at 5.442 per cent in September.

Underlying inflation in the eurozone will stay high in the near term, so a 50 basis-point European Central Bank (ECB) interest rate increase later this month is increasingly certain, ECB president Christine Lagarde told Spanish media group Vocento.

Although gold is considered a hedge against inflation, interest rate hikes to bring down price pressures increase the opportunity cost of holding non-yielding bullion.

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Gold prices firm as dollar eases; set for weekly gain

Spot silver fell 0.2 per cent to US$21.20 per ounce, platinum lost 0.7 per cent to US$970.84 and palladium slipped 0.6 per cent to US$1,443.65. REUTERS