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Gold down over 2% so far this week
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Gold hits lowest level since late Dec
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U.S. dollar index hits 6-week peak
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10-year U.S. Treasury yields hit highest since late-Dec
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Palladium down 3%
(Adds details and updates prices)
By Kavya Guduru
Feb 17 (Reuters) - Gold prices dipped on Friday and were
set for a third weekly drop, as investors fretted about more
rate hikes by the U.S. Federal Reserve after a slew of strong
economic data.
Spot gold was down 0.8% at $1,822.75 per ounce, as of
0735 GMT, after earlier falling to its lowest since late
December. Bullion has fallen about 2.2% so far this week. U.S.
gold futures slipped 1.1% to $1,831.30.
Gold is considered a hedge against inflation, but higher
interest rates increase the opportunity cost of holding
non-yielding bullion.
This week's data showing stronger U.S. retail sales and high
consumer prices "seems to be fuelling a reassessment... markets
think the Fed will go into a more hawkish setting, and that is
very bad for gold," said Ilya Spivak, head of global macro at
Tastylive.
Real interest rates have rebounded against this backdrop, so
non-yielding gold has been down, Spivak said.
Several Fed officials this week echoed that the monetary policy needed to remain tight to bring inflation down to the central bank's 2% target. Two Fed officials said on Thursday the U.S. central bank likely should have lifted interest rates more than it did early this month. Data on Thursday showed U.S. monthly producer prices rebounded 0.7% last month. Meanwhile, the number of Americans filing new claims for unemployment benefits slipped to 194,000 for the latest week. Money markets now expect benchmark rates to rise above 5% by May and stay at those levels through the year. The dollar index surged to a six-week high. Gold competes with the dollar as a safe store of value, and gains in the currency make bullion less attractive for overseas buyers. Benchmark 10-year Treasury yields hit their highest since late December. Spot silver lost 1.2% to $21.35 per ounce, platinum was 0.3% lower at $917.49 and palladium shed 3% to $1,464.74. (Reporting by Kavya Guduru in Bengaluru; Editing by Rashmi Aich and Subhranshu Sahu)
