Gold bound for weekly decline on hawkish Fed cues

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Gold prices edged up on Friday on a pullback in the dollar but were still bound for their first weekly decline in three, weighed down by signals from U.S. central bankers that more interest rate hikes were on the way.

Spot gold rose 0.1% to $1,763.17 per ounce by 0303 GMT, en route to a weekly decline of about 0.4%.

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U.S. gold futures were up 0.2% to $1,765.50.

Gold continues to be supported by rising recession risks, the still-evolving Ukraine war and the peaking of the U.S. dollar, Fitch Solutions said in a note.

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“On the other hand, growing optimism towards the Chinese economy, still high risks of the U.S. Federal Reserve raising rates further and more aggressively than the market expects, and a peaking of inflation in Q3 will continue to pressure gold.”

Offering some respite to gold, the dollar index, a rival safe haven, inched lower, making bullion cheaper for overseas buyers.

However, the U.S. currency was still headed for its best week in a month, as hawkish remarks from Fed officials and stronger-than-expected domestic monthly retail sales put the brakes on a pullback triggered by signs of softening inflation.

Markets are currently pricing in an 87% chance of a 50 basis points hike at the Fed’s December meeting, after four straight 75 bps increases.

High interest rates discourage investing in gold, which does not pay any interest.

After months of decline, bullion prices shot up on bets that U.S. rate hikes will slow, but analysts said institutional investors are wary and further gains could be elusive.

Among other metals, spot silver rose 0.8% to $21.11 per ounce, platinum added 0.4% to $984.50, and palladium climbed 0.7% to $2,020.21. All were, however, on course to end the week lower. (Reporting by Arundhati Sarkar and Arpan Varghese in Bengaluru; Editing by Savio D’Souza)

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