Gold set for its first weekly decline

Gold was headed on Friday for its first weekly drop in four, as reduced bets for an early interest rate cut in the US boosted the dollar and bond yields, while investors awaited a key employment report.

Spot gold was little changed at $2,042.89 per ounce, as of 0810 GMT. It has declined about 0.9 per cent so far in the week. US gold futures were flat at $2,049.80.

“Gold is down this week as yields and the dollar rebound. That’s because markets have been scaling back Fed rate cut expectations since the start of the New Year,” said Ilya Spivak, head of global macro at Tastylive.

The dollar index rose 0.2 per cent against its rivals and was headed for its best week since May, making bullion more expensive for other currency holders.

Benchmark US 10-year Treasury yields, meanwhile, held above 4 per cent and were on track for their best week since October.

Federal Reserve officials were convinced that inflation was coming under control but noted an elevated degree of uncertainty about the rate cut outlook, minutes of the Fed’s Dec. 12-13 meeting showed.

“The Fed has already signalled rate cuts this year, so now the question is of degree. Once the excesses of Nov-Dec are corrected, the overall trend this year still favours gold gains (for now),” added Spivak.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion.

Market participants have tempered their expectations of monetary policy easing by the Fed, pricing in about a 65% chance of a rate cut by March, compared with a 90 per cent chance a week ago, according to the CME FedWatch tool. Investors now await the US non-farm payrolls report due at 1330 GMT for further direction on rate outlook.