Gold price heads for weekly decline following central bank rate hikes

US Federal Reserve. Credit: Wikimedia Commons

Gold was back in the red on Friday, on course to finish lower for the week, as a firming dollar and interest rate hikes from major central banks dented the safe-haven metal’s appeal.

Spot gold fell 0.7% to $1,844.63 per ounce by 11:45 a.m. ET, while US gold futures dipped 0.2% to $1,846.40 per ounce in New York.

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Gold is giving up some gains after Thursday’s big move due to the 1.2% rise in the dollar, said RJO Futures senior market strategist Bob Haberkorn in a Reuters report.

But it remains “stuck in the middle of a tug of war between inflation and interest rates,” Haberkorn added.

The US Federal Reserve announced its largest rate increase since 1994 this week, while the Swiss National Bank raised its policy rate for the first time in 15 years. The Bank of England also followed suit.

“While firmer inflation on its face is bullish for (precious metal) prices, it is now being quickly counteracted by more aggressive pricing for a policy response from the Fed and other central banks, likely keeping prices constrained,” JP Morgan said in a note.

Still, gold’s safe-haven lure is supported by rising risks of stagflation, decades-high inflation and the turmoil in risky assets, according to Saxo Bank analyst Ole Hansen. “That is why gold has not fallen at the pace dictated by rising real yields,” he said.

(With files from Reuters)