Gold steadied on Friday ahead of US jobs data due later in the day, though the metal was set for its biggest weekly drop since late November, weighed down by firmer bond yields as traders braced for rate hikes by the Federal Reserve.
Spot gold was up 0.1% at $1,790.90/oz by 0341 GMT after two consecutive sessions of falls, cutting its weekly fall to about 2%. US gold futures were up 0.2% to $1,792.60.
“Markets are increasingly pricing in an aggressive Fed … the whole prospect of Fed trying to control an inflation outbreak is obviously lifting yields,” IG Markets analyst Kyle Rodda said, adding that bullion was losing some of its appeal on that basis.
Traders are anticipating a greater than 70% chance for a rate hike of at least 25 basis points at the Fed’s March meeting, according to the CME FedWatch Tool, as even the most dovish of US central bankers felt the need to tighten policy this year.
Benchmark US 10-year treasury yields rose to the strongest level since March 2021, while yields on 10-year treasury inflation-protected securities (TIPS) hit June 2021 highs. Higher yields raise the opportunity cost of holding gold.
Bullion is considered an inflationary hedge, but the metal is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion.
Spot gold may stabilise around support at $1,782/oz and rise into a range of $1,801-$1,815, according to Reuters technical analyst Wang Tao.
Looking ahead, the US non-farm payrolls report due at 1330 GMT is on investors’ radar.
“A number above 550/600k will reinforce the Fed tightening faster narrative and weigh on gold. A number lower than 250k will ease those concerns and provide some support for gold,” said Jeffrey Halley, a senior market analyst at Oanda.
Spot silver was little changed at $22.14/oz, platinum rose 0.2% to $966.50 and palladium inched down 0.1% to $1,872.02.