Gold inches up despite stronger dollar

Gold prices edged higher on Friday despite pressure from a stronger US dollar and bond yields, with investors assessing major central banks’ decisions to stand pat on rates as a signal of imminent global economic pain.

Spot gold was up 0.2% at $1,923.29/oz by 3.50am GMT, having logged its biggest daily drop since September 5 on Thursday. US gold futures also rose 0.2% to $1,943.10.

Central banks for the world’s biggest economies have served notice that they will keep interest rates as high as needed to tame inflation, even as two years of unprecedented global policy tightening reach a peak.

“The markets looked at central banks and said you’re not stopping hikes because inflation is beat, you’re stopping because you’re worried that global growth is about to stop,” said Ilya Spivak, head of global macro at Tastylive.

“There is a very strong sense that global growth is running out of legs to stand on.”

The dollar stood near a six-month peak on the prospects of higher-for-longer US rates, while benchmark 10-year Treasury yields climbed a 16-year high and stocks remained under pressure.

Investors traditionally buy gold as a hedge against economic uncertainty, but higher interest rates tend to weigh on non-interest-paying bullion, which is priced in dollars.

Markets priced in a 45% chance of one more rate hike by the Federal Reserve before next year, while also seeing roughly a 44% chance of some easing in the first half of 2024, according to the CME FedWatch tool.

Traders also digested the Bank of Japan’s decision to maintain ultra-low interest rates, while awaiting key purchasing managers’ index (PMI) data out of the UK, the US and eurozone later in the day.

Spot silver rose 0.4% to $23.47/oz, set for its best week in four.

Platinum gained 0.7% to $925.77 and palladium jumped 0.8% to $1,272.85.

Reuters