Gold set for biggest weekly fall in 3 years as Fed rate-cut bets ease

Synopsis

Gold prices were heading for their most significant weekly drop in over three years as the dollar strengthened due to expectations of less aggressive interest rate cuts by the U.S. Federal Reserve. This rise in the dollar made gold less appealing to investors holding other currencies.

Gold prices on Friday were on track for their biggest weekly decline in over three years as expectations of less aggressive interest rate cuts by the U.S. Federal Reserve lifted the dollar, denting allure for bullion among investors.

Spot gold lost 0.1% to $2,565.49 per ounce as of 01:44 p.m. ET (1842 GMT). Prices have fallen more than 4% so far this week, touching their lowest since Sept. 12 on Thursday. U.S. gold futures settled 0.1% lower at $2,570.10.

The dollar was set for its biggest weekly gain in more than a month, making gold more expensive for other currency holders.

U.S. Treasury yields, meanwhile, extended gains after data showed retail sales in the world's largest economy rose more than expected last month.

"All the uncertainties, specifically the short-term uncertainties have been removed from the mix. Now gold is just going back to basic fundamentals," said Alex Ebkarian, chief operating officer at Allegiance Gold.

Economists believe President-elect Donald Trump's tariff plans would stoke inflation, potentially slowing the Fed's rate easing cycle.

Higher interest rates make holding gold less attractive as it is a non-yielding asset.

Speaking on Thursday, Fed chair Jerome Powell said the U.S. central bank did not need to rush to lower interest rates.

Markets now see a 62% chance of a 25-basis-point rate cut in December, down from 83% a day before, according to the CME Fedwatch tool.

"So far gold has been negatively impacted by the election of Trump but this can change if there is some more uncertainty which could come back in the medium term," said Kinesis Money market analyst Carlo Alberto De Casa.

Traders will now be on the lookout for remarks from several Fed officials scheduled to speak later in the day.

Spot silver fell 0.4% to $30.32 per ounce, platinum was down 0.1% at $939.22 and palladium added 0.7% to $947.77. All three metals were on track for weekly declines.

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