Gold set for first weekly fall as US rate cut bets retreat

Gold prices rose on Friday, but were headed for their first weekly fall in three as expectations for US interest rate cuts began to fade following the hawkish tone adopted in the Federal Reserve’s latest minutes.

Spot gold rose 0.4 per cent to $2,338.57 per ounce as of midday on Friday. Bullion hit a record high of $2,449.89 on Monday, but has fallen about 5 per cent since then.

US gold futures were up 0.1 per cent to $2,339.80.

“As the market starts to correct lower, unquestionably, you will find those who missed the rally jumping in on what they perceive to be an opportunity to participate,” said independent analyst Ross Norman.

The dollar index edged lower, making greenback-priced bullion less expensive to overseas buyers.

Minutes from the Fed’s latest meeting showed a live debate among policymakers as to whether current rates are sufficiently restrictive to cool inflation.

While the policy response for now would “involve maintaining” interest rates at current levels, the minutes reflected discussions of possible hikes.

Higher interest rates make non-yielding gold a less appealing investment.

Traders’ bets signalled growing doubts that the Fed will cut rates more than once in 2024, currently pricing in about a 63 per cent chance of a rate cut by November according to the CME FedWatch Tool.

Previous expectations were for a likely first rate cut in September.

“This shift drove an increase in Treasury yields and a stronger dollar, punishing the price of the non-yielding precious metal,” said Ricardo Evangelista, Senior Analyst at ActivTrades.

Spot silver rose 1.1 per cent to $30.42. It hit a 11-year high on Monday.

Platinum edged 0.5 per cent higher to $1,024.00 and palladium fell 0.79 per cent to $961.68. All three metals were headed for weekly losses.

Gold holdings in SPDR Gold Trust fell 0.62 per cent on Thursday, while holdings in iShares Silver Trust rose 0.20 per cent.