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Spot Gold Set for Fourth Weekly Fall Amid Rate Hike Expectations, Dollar Strength

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Spot Gold Set for Fourth Weekly Fall Amid Rate Hike Expectations, Dollar Strength

Spot gold headed for its fourth weekly fall as expectations of US interest rate hikes combined with a stronger dollar weighed on the yellow metal.

Spot gold is down 1.8% for the week so far. If that direction holds, it would be spot gold's fourth weekly fall in a row. It was last up 1.3% at $4,078.43 per troy ounce on Friday.

Gold for August delivery rose 1.2% to $4,097.40 per ounce, but has fallen 3.4% this week.

Data on Thursday showed annual inflation, as measured by the personal consumption expenditure price index, accelerated to 4.1% in May, the fastest print since April 2023.

"The prospect of higher rates and notable dollar strength have and will hold gold back, but for a few reasons we are still positive on gold in the medium to long-term," Helima Croft, head of global commodity strategy and Middle East and North Africa research at RBC Capital Markets, said in a note.

Last week, the Federal Reserve kept interest rates unchanged for the fourth consecutive policy meeting and removed the so-called easing bias from its policy statement. At the time, it raised policy rate expectations.

The dollar index slipped 0.2% intraday Friday, but was on track for its second consecutive weekly gain. The index is up 2.4% so far this month.

Gold prices generally have an inverse relationship with interest rates and the dollar index. Earlier this year, the yellow metal rallied to all-time highs amid mounting geopolitical concerns.

ING Bank has lowered its price forecasts for gold. It now sees the metal averaging $4,300 per ounce in the third quarter and $4,600 in the fourth quarter, down from its prior projections of $4,850 and $5,000, respectively.

"Following recent Fed communication, investors have pushed back expectations for monetary easing, driving Treasury yields higher and supporting the US dollar," ING Commodities Strategist Ewa Manthey said in a report Wednesday. "This has created a less favorable backdrop for gold, which typically struggles when real yields rise and the dollar strengthens."

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