Gold on Track for Weekly Loss as Strong Dollar, Fed Rate Hike Bets Weigh

Gold prices edged higher in Friday trading but were on course for a weekly loss, as a strengthening U.S. dollar and mounting expectations for further Federal Reserve interest rate hikes weighed on the non-yielding asset.

By early Friday, spot gold had risen 0.5% and gold futures were up 0.7%, according to data from Investing.com. However, these gains were not enough to reverse the week's downward trend, which was largely driven by macroeconomic pressures.

Hawkish Fed and Dollar Strength Dominate

The primary headwind for gold is the market's anticipation of a more aggressive monetary policy from the Federal Reserve to combat persistent inflation. Since gold pays no interest, higher interest rates and bond yields increase the opportunity cost of holding bullion.

This sentiment has fueled a rally in the U.S. dollar and Treasury yields.

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• The U.S. Dollar Index, which measures the greenback against a basket of major currencies, gained 0.9% over the week, making dollar-denominated gold more expensive for international buyers.
• U.S. Treasury yields rose sharply on Thursday, with the 30-year bond yield nearing a multi-decade high, further dampening the appeal of gold.

Inflation Concerns Linger

Investors are also closely watching energy markets, where elevated oil prices are fanning concerns that higher fuel costs could further entrench inflation. A sustained rise in energy prices could compel the Fed to maintain its hawkish stance, creating additional downside risk for gold.

Despite the challenging environment, analysts at ANZ Bank noted that investment demand for gold has remained resilient, with no significant sell-off observed yet, according to the source. In the near term, gold's trajectory is expected to remain closely linked to movements in oil prices, Treasury yields, and market expectations for the Fed's next policy move.