Gold heads for biggest weekly gain since March as dollar falls

Silver, platinum and palladium climbed.
Image: Chris Ratcliffe/Bloomberg

Gold headed for its biggest weekly gain since March amid speculation that the Federal Reserve will slow the pace of interest rate increases as the US economy slows.

Bullion’s climb, which was supported by a weaker dollar and declining Treasury yields, saw prices hit a three-week high. While the Fed raised rates by 75 basis points again this week, data showing that the US is in a technical recession signaled that the central bank could become less aggressive as it combats inflation.

Despite the rebound, gold remains on track for a fourth straight monthly loss, with bullion-backed exchange-traded funds set for the biggest outflow in July since March 2021. Treasury Secretary Janet Yellen gave a glass-half-full assessment of the economy, acknowledging a slowdown she called necessary to tame inflation while rejecting the notion the country had entered a recession.

“The Fed has repeatedly emphasised on getting inflation under control and may not diverge from its position unless there are significant signs of improvement in price pressures,” said Madhavi Mehta, a senior analyst at Kotak Securities Ltd. “So yes, the Fed will slow down the rate hikes but it may not happen soon,” and the current market enthusiasm for gold may turn out to be temporary, she said.

Spot gold advanced as much as 0.5% to $1 764.01 an ounce, the highest intraday level since July 6, and traded at $1 761.73 at 12:46 p.m. in Singapore. It’s 2% higher this week. The Bloomberg Dollar Spot Index headed for a back-to-back weekly loss. Silver, platinum and palladium climbed.

© 2022 Bloomberg

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