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Dollar set for first weekly gain since February
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Gold down 0.8% for the week so far
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Silver sees first weekly fall in six
(Adds details, updates prices)
By Seher Dareen
April 21 (Reuters) - Gold prices dropped about 1% on
Friday and were headed for their biggest weekly decline in
around two months with markets expecting the U.S. Federal
Reserve to opt for a higher for longer interest rate stance to
control inflation.
Spot gold was down 0.8% at $1,987.59 per ounce by
1150 GMT. Bullion has also lost about 0.8% so far this week, its
biggest such decline since late February. U.S. gold futures fell 1% to $1,998.10.
Gold is re-pricing based on the Fed's rate-hike path ahead
and hawkish comments by some board members, said Carlo Alberto
De Casa, external analyst at Kinesis Money.
The market is now expecting higher rates for a longer time,
with another rate hike after May, De Casa said.
Rate hikes raise the opportunity cost of holding
non-interest-bearing gold.
Markets are pricing in an 84% chance of a 25-basis-point
interest rate rise in May, leaving the dollar on track for its
first weekly gain in over a month and making bullion expensive
for overseas buyers. Fed officials said on Thursday inflation remains "far above"
the central bank's 2% target. Fed Governor Michelle Bowman
reiterated that more work needs to be done to bring down
too-high inflation.
Next week's GDP data and the price deflator for consumer
expenditures (PCE), the Fed's preferred inflation measure, could
trigger some price movement, but no clear direction is likely
before the central bank's next meeting, said analysts at
Commerzbank in a note.
On the physical front, elevated domestic prices muted demand
for gold across Asian hubs this week, forcing dealers in India
to offer discounts, with the Akshaya Tritiya festival also
failing to offer much respite. Spot silver fell 0.6% to $25.14 per ounce, and is
headed for its first weekly decline in six.
Platinum rose 0.5% to $1,098.83, while palladium jumped 1.1% to $1,603.51.
(Reporting by Seher Dareen and Ashitha Shivaprasad in
Bengaluru; Editing by Shilpi Majumdar, Kirsten Donovan)
