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Gold prices fell to their lowest in a week on Friday, and were set for their biggest weekly fall since August, on a firmer dollar as the US Federal Reserve indicated they will continue to raise interest rates, lowering demand for bullion.
Spot gold fell 0.4 per cent to $1,218.23 per ounce at 0357 GMT, having touched its lowest level since November 1 at $1,218.08. Gold was down 1.2 per cent for the week, its biggest weekly decline since the week of August 17. US gold futures fell 0.3 per cent to $1,221.70 per ounce.
“Gold has come under pressure because of a stronger dollar. Also the FOMC meeting showed no change in interest rates. Market sentiment from here could be bearish for gold,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.
The dollar gained against its major peers on Friday as the Fed had on Thursday kept interest rates steady but reaffirmed its monetary tightening stance. Higher interest rates raise the opportunity cost of holding gold, which does not pay interest and incurs costs to store and insure. The dollar index, which measures the greenback against a basket of six major currencies, climbed about 0.8 per cent in the previous session.
“We remain cautious on gold here as roughly half the recent advance seems to have been rolled back in recent days on account of a stronger dollar and more resiliency in US equity markets,” said INTL FCStone analyst Edward Meir in a note.
“In addition, US interest rates seem to be on the march again... there is not much of an upside trigger that could lead to a sustainable rally.”
The Fed has hiked rates three times this year and is widely expected to do so again in December because of a robust US economy, rising inflation and solid jobs growth. Spot gold is expected to test a support at $1,211 an ounce, with a good chance of breaking below this level and falling more to $1,202, said Reuters technical analyst Wang Tao.
Among other precious metals, silver fell 0.6 per cent to $14.32 per ounce. The metal was headed for its biggest weekly percentage decline in nine weeks, slipping about 2 per cent so far. Platinum dipped 1.2 percent to $853.45 an ounce, its lowest level in a week. The metal was down about 1 per cent so far for the week, its biggest fall since late September. Palladium was down about 0.3 per cent to $1,120.60 per ounce, though it was up 0.6 per cent for the week, set for its fourth weekly gain.
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