Gold prices remained firm on Friday as the U.S. dollar pulled back from recent highs. However, the precious metal was still on track for a weekly decline as market focus shifted beyond the widely expected pause in Federal Reserve policy this month, directing attention to consistently strong U.S. economic data.
Spot gold inched up 0.3% to reach $1,925.14 per ounce by 0545 GMT, although it was heading for a 0.7% weekly decrease. Meanwhile, U.S. gold futures rose 0.4% to $1,949.40.
Ilya Spivak, Head of Global Macro at Tastylive, noted, “If the Fed ends up needing to hold longer, that becomes the worst of all possible worlds for gold because that means higher yields and a stronger dollar.”
The U.S. dollar saw a 0.2% dip but was poised for its longest weekly winning streak in nine years, boosted by strong U.S. economic data.
Recent data indicated that the U.S. services sector gained momentum in August, and jobless claims unexpectedly fell to the lowest level since February.
Spivak further commented, “The U.S. is the last pocket of resilience for the global economy; that resilience is weakening because the Federal Reserve obviously has its sights on exactly this.”
Three Federal Reserve officials suggested on Thursday that the central bank might postpone a rate hike in September but emphasized that there was more work needed to control inflation.
Markets are currently pricing in a roughly 93% chance that the Fed will maintain its current interest rates at the September 19-20 meeting. However, there is a 41% probability of one more rate hike before 2024, as per the CME FedWatch tool.
Higher rates tend to boost returns on competing safe-haven Treasury bonds, which are poised for their first weekly gain in three weeks, making non-interest-bearing gold less appealing.
In other precious metals, silver rose 0.6% to $23.09 per ounce, while platinum gained 0.4% to $907.04. Both metals, however, were set for their worst weeks since June 23.
Palladium experienced a 1% increase, reaching $1,224.03, breaking a three-week losing streak.
