Gold heads for worst week in 2 months as dollar rises

GOLD prices fell more than 1 per cent on Friday (Oct 14) and were headed for their worst week since mid-August, dragged lower by a stronger US dollar and worries the Federal Reserve will persist with sharp rate hikes to curb inflation.

Spot gold had fallen 1.3 per cent to US$1,643.90 per ounce by 13:42 pm EDT (1742 GMT), down about 2.9 per cent so far this week. US gold futures settled 1.6 per cent lower at US$1,649.50.

The US dollar rose over 0.6 per cent against its rivals, making greenback-priced bullion more expensive for overseas buyers.

Gold prices are increasingly correlated with the moves in the dollar and could fall to as low as US$1,600 an ounce, said Daniel Ghali, commodity strategist at TD Securities.

Data on Thursday showed US consumer prices increased more than expected in September, providing ammunition to the Fed to deliver another big rate hike, and consequently setting up what could be gold’s worst week in nearly two months.

Gold is highly sensitive to rising US rates, which boost bond yields, increasing the opportunity cost of holding non-yielding gold.

Bullion shed as much as 1.8 per cent on Thursday before recovering to end the session 0.4 per cent lower as the dollar lost ground after initially spiking following the inflation report.

“A rebound of that magnitude (for gold) after that inflation report was strange to say the least,” said Craig Erlam, senior market analyst at Oanda. “Gold moving lower again today is more in line with what we learned from the data.”

Benchmark US 10-year Treasury yields firmed, further weighing on gold.

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Silver fell 3.5 per cent to US$18.22 per ounce, and was set for its biggest weekly drop since September 2020.

Platinum dipped 0.3 per cent to US$893.99 per ounce, while palladium fell 4.9 per cent to US$2,003.38. Both remain on course for weekly declines. REUTERS