Mounting rate hike bets keep weekly loss in sight for gold

Gold prices edged higher on Friday but were headed for a weekly loss, as concerns about sticky inflation, hawkish signals from Federal Reserve policymakers, and higher US Treasury yields dented bullion's appeal.

Spot gold was up 0.1% at $4,282.98 per ounce by 2:05 p.m. ET (1805 GMT). Prices were headed for a weekly loss, down about 2.1% so far. US gold futures settled 0.5% higher at $4,321.20.

"The unrelenting surge in Treasury yields has set gold on course for its 4th weekly decline over the past five weeks," said Han Tan, chief market analyst at Bybit.

The US benchmark 10-year bond yield hit a fresh 19-year high, increasing the opportunity cost of holding non-yielding bullion.

"The zero-yielding precious metal has struggled against a cacophony of headwinds, including persistent upside inflation risks, runaway Treasury yields, and a hawkish Fed," Tan added.

Since the onset of the US-Israeli war on Iran, rising energy prices kept inflation concerns alive, forcing central banks to adopt tighter policy frameworks to keep price pressures under check.

The Fed raised interest rates by a quarter-point last week, its first increase in three years, and signalled more hikes ahead. Traders are pricing in a 66% chance of an October hike and a 93% chance of one in December, according to CME's FedWatch Tool.

Gold is traditionally considered an inflation hedge and a safe investment during geopolitical uncertainty. However, higher interest rates tarnish its attractiveness as investors turn to yield-bearing assets. Bullion has fallen about 19% from its February 27 session high.

Negotiators in New York are exploring a phased path out of war that would involve Tehran reopening the Strait of Hormuz and Washington lifting its economic blockade of Iran, according to sources. Oil prices dropped about 3% as some supply fears eased.

Spot silver gained 0.5% to $64.26 per ounce, platinum rose 1.7% to $1,780.28, and palladium fell 0.3% to $1,270.30. All three metals were poised for weekly losses.
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