Hawkish Fed signals send gold to third straight weekly loss

Gold prices fell on Friday, putting the yellow metal on track for a third straight weekly decline, pressured by a firmer US dollar and a hawkish Federal Reserve. Spot gold was down 0.9 percent at $4,169.44 per ounce by 1306 GMT, after earlier hitting its lowest level since June 11 at $4,119.78. It has been trading below the 200-day moving average since June 5.

US gold futures fell 1.4 percent to $4,186.50.

The US dollar was headed for a weekly gain, making greenback-priced metals less affordable for holders of other currencies. “Gold faces a distinct risk of dropping deeper into bear market territory and below the $4,000/oz mark, as the precious metal continues to navigate a challenging environment,” said Nikos Tzabouras, senior market analyst at Jefferies-owned Tradu.com. “Higher-for-longer Fed expectations are toxic for non-yielding assets while benefiting the dollar,” Tzabouras added. Nine of the US central bank’s 19 policymakers now think they will need to raise the Fed’s policy rate this year, according to projections published on Wednesday, when the Fed’s board decided to leave the rate in its current 3.50 percent-3.75 percent range.

Traders currently see a 70 percent chance of a Fed hike by September, according to the CME FedWatch Tool. Gold’s “trajectory will depend on developments in the US-Iran negotiations, next week’s US inflation update and how markets price the Fed from here”, said Tzabouras.