Gold prices fell on Friday as the dollar
held near recent peaks and Treasury yields firmed while
investors positioned for Federal Reserve Chair Jerome Powell’s
speech at Jackson Hole for indications on further rate rises.
Spot gold fell 0.7% to $1,746.00 per ounce by 1112
GMT. U.S. gold futures were 0.7% lower at $1,759.00.
The dollar index edged lower on the day, but was still well
within sight of a two-decade peak, hurting appetite for gold
among overseas buyers, with U.S. benchmark 10-year Treasury
yields also firmer.
“With the dollar holding at near to 20-year highs and with
the 10-year treasury holding above 3%, gold has some serious
headwinds,” said independent analyst Ross Norman.
Powell is scheduled to speak at 1400 GMT at the conference
But some market participants do not expect a clear message
from Powell on the size of the next hike, with recent comments
on rates from Fed policymakers indicating they could go further.
“For gold, the outcome for price direction will likely be
the second order effect seen through the next dollar move,”
While gold is considered a safe bet during economic
uncertainty, interest rate hikes increase the opportunity cost
of holding the non-yielding asset.
“If Powell wants to manage expectations, he could argue the
case that rates are likely to be higher for longer, thus making
rate cuts next year less likely. That could push yields up and
undermine gold prices,” said Michael Hewson, chief market
analyst at CMC Markets UK.
In physical markets, gold premiums in China jumped this week
to their highest since last October, but demand cooled in India.
Spot silver shed 0.5% to $19.19 per ounce, but was on
track for a weekly gain.
Platinum dropped 0.7% to $874.44, and palladium
fell 0.8% to $2,129.05.
(Reporting by Arundhati Sarkar in Bengaluru
Editing by Tomasz Janowski and David Evans)