By Seher Dareen
(Reuters) – Gold slipped on Friday as the dollar gained some ground in the wake of U.S. economic data, with investors still trying to pin down the Federal Reserve’s likely move on interest rates next week.
Spot gold fell 0.2% to $1,925.99 per ounce by 11:05 a.m. ET (1605 GMT), giving up initial gains soon after data showing U.S. consumer spending fell in December, even as the core PCE index gained 0.3%.
U.S. gold futures were also down 0.2% to $1,926.10.
“[The Fed] need to be convinced and their favourite indicators are showing inflation is cooling, but I think there still needs to be a bit more work done,” said Edward Moya, senior market analyst at OANDA.
The market was still good for gold as a recession would be bullish, and bullion could still thrive in a smaller rate-hikes environment, Moya added.
Data on Thursday showed the U.S. economy grew faster than expected, causing gold to retreat more than 1%.
The weak handover to 2023 raises the risks of a recession by the second half of 2023, but also reduces the need for the Fed to maintain overly aggressive monetary policy.
The dollar index was 0.3% higher, making greenback-priced gold less attractive to holders of other currencies, while benchmark Treasury yields were off their week-high. [USD/][US/]
Fed policymakers have signalled they expect rates ultimately to go a bit higher – to just over 5% – while traders are looking out for a terminal rate of 4.9% in June.
Gold, which pays no interest, tends to benefit when interest rates are low as it reduces the opportunity cost of holding bullion.
Spot silver dipped 1.9% to $23.44 per ounce, platinum was down 1.6% to $1,002.02, while palladium sank 3.1% to $1,624.44 per ounce.
Palladium’s rallies are likely to be slowing, per analysts, as rising supply and stagnant demand are seen eroding prices of the auto-catalyst used to neutralise vehicle exhaust emissions.
(Reporting by Seher Dareen in Bengaluru; Editing by Maju Samuel)
