IGI Logo

Gold prices retreated to a three-week low on Friday as the dollar rallied after the U.S. Federal Reserve looked set to deliver a rate hike in March, setting bullion on course for its worst week since late November.

Spot gold XAU= was down 0.4% to $1,789.40 per ounce at 1033 GMT. U.S. gold futures GCv1 were down 0.2% to $1,790.70.

Gold prices rallied to an over two-month high earlier in the week as heightened tensions over Ukraine and increased market volatility ratcheted up interest in safe-have bullion.

Prices have dropped more than 3% since, slipping below the 100-day and 200-day moving averages in the last session, after the Fed on Wednesday reaffirmed plans to end its pandemic-era bond purchases and signalled an interest rate hike in March. (Full Story)

"Both bulls and bears will be equally frustrated by the recent (gold) price movements," said Ross Norman, an independent analyst.

"The market seems to be looking at the $1,800 level, which behaves like a giant magnet to the price. And we seem to continue to hover around that point," Norman said, adding the dollar's strength and rising yields were pressuring gold.

Rising rates increase the opportunity cost of holding non-yielding bullion, which is priced in dollars.

"Another rate hike this year has been priced in since the Fed's meeting, as can be seen from the Fed Fund Futures. This was clearly "too much" for gold, causing the price to fall," Commerzbank wrote in a note.

The World Gold Council (WGC) expects demand for jewellery, small bars and coins to remain strong in 2022 and for central banks "to continue buying gold but at a slower pace than in 2021." (Full Story)

Spot silver dropped 1% to $22.52 an ounce, and is set for a 7% drop for the week.

Platinum fell 2% to $1,001.74, while palladium XPD= declined 4.1% to $2,278.10, but has gained about 8% so far this week.