Gold prices edged lower on Friday and were heading for a weekly decline of more than 2% as a stronger US dollar, higher Treasury yields and expectations of further Federal Reserve rate hikes weighed on bullion.
Spot gold fell 0.1% to US$4,274.90 an ounce as of 0632 GMT, while US gold futures edged 0.3% higher to US$4,310.30.
The dollar was on track for a weekly gain, making gold more expensive for holders of other currencies, while US Treasury yields continued to climb.
“When we start to see markets pricing in a much more hawkish Fed, it strengthens the dollar and is negative for gold,” said Kelvin Wong, senior market analyst at OANDA.
Expectations for higher US rates have strengthened after two Federal Reserve policymakers said further increases could be needed to bring inflation under control, following last week’s 25-basis-point rate hike.
Markets are currently pricing in a nearly 71% probability of another Fed rate increase in October, according to the CME FedWatch Tool.
RHB Research also maintained a bearish technical view on COMEX gold after the metal extended its correction on Thursday, falling US$19.70 to close at US$4,265.10.
The contract opened at US$4,291.60 and reached a session high of US$4,304.50 before falling to US$4,246.40 and closing at US$4,265.10.
RHB said the lower close and a declining relative strength index indicated that bearish momentum was strengthening, while the 20-day simple moving average was also turning lower.
The research house expects gold to retrace towards US$4,150, with immediate resistance at US$4,400.
RHB advised traders to maintain short positions initiated at US$4,284.80 on Sept 23, with a stop-loss at US$4,500. It identified US$4,150 and US$4,000 as support levels, followed by US$4,400 and US$4,500 as resistance.
Despite gold’s traditional role as an inflation hedge, higher interest rates can reduce demand for the non-yielding asset by increasing the appeal of interest-bearing investments.
Meanwhile, gold demand in India picked up modestly during the week as the price correction attracted buyers ahead of the festive season.
Elsewhere, spot silver fell 0.2% to US$63.76 an ounce, while platinum gained 0.1% to US$1,750.80 and palladium dropped 1.5% to US$1,254.73. All three metals were also heading for weekly losses.
