Gold slipped Friday after Federal Reserve Chair Kevin Warsh warned that persistent inflation could keep interest rates higher for longer, pressuring the metal after its recent run to a three-month high. The pullback puts bullion on track for a marginal weekly loss, breaking a three-week winning streak.
Gold fell 0.8% to $4,560.37 an ounce on Friday. U.S. gold futures dropped 0.2% to $4,655.41, as Warsh signalled that stubborn inflation could require rates to stay elevated for longer, denting demand for the non-yielding metal.
Bullion cools after a three-month high
Bullion had touched a three-month high near $4,700 an ounce earlier this week, as concerns over U.S. fiscal policy and Treasury moves to support longer-dated bonds fueled demand for the metal. Still, gold was set for only a marginal weekly fall after three consecutive weeks of gains. Despite Friday's pullback, the broader backdrop remains supportive: gold has gained more than 13% in August.
Inflation data complicates the rate outlook
Recent data have complicated the case for monetary easing. The Fed's preferred inflation gauge, the personal consumption expenditures price index, rose 3.7% in the year through July, adding to bets the central bank could hike rates this year. Markets are now pricing a 34% chance of a rate hike in September and a 74% probability of a hike by December, according to the CME FedWatch tool.
Higher interest rates tend to weigh on gold because the non-yielding asset becomes less attractive next to interest-bearing investments. Gold had recently benefited from lower yields and a softer dollar, which reduce the opportunity cost of holding the metal and make it cheaper for buyers holding other currencies.
Silver and platinum extend gains
Among other precious metals, silver prices rose 2% to $70.67 an ounce. Platinum also climbed 2.4% to $1,894.60 an ounce.
Source: Commodities & Futures News
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