Gold set for best week

Gold edged lower on Friday having gained in the previous five sessions as growing expectations of a pause in US interest rate hikes set bullion on course for its biggest weekly gain since April.

Spot gold fell 0.2% to $1,955.90 per ounce by 0952 GMT, but has gained 1.6% so far this week and earlier hit its highest since June 16. U.S. gold futures eased 0.2% to $1,960.50.

Peter Fertig, an analyst with Quantitative Commodity Research, noted some of the Fed members had said a further rate hike in September was a strong possibility.

“Therefore from the interest rate side, there is still some headwind for the precious metal,” he said.

Benchmark U.S. Treasury yields edged up from their two-week low on Thursday, making non-yielding bullion less attractive to investors.

Fed Governor Christopher Waller on Thursday said he was not ready to call an all-clear on inflation and favoured more rate hikes this year – a sentiment reflected in June’s FOMC minutes.

The markets, however, anticipate one 25 bps rate hike at the Fed’s July 25-26 meeting for this year, per CME’s Fedwatch tool.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

The prospect of slowing U.S. inflation drove the dollar towards a 15-month low.

Gold’s advance for the week was less than the broad dollar decline, which highlighted the risk of a pullback if short covering lifts the U.S. currency, Saxo Bank head of commodity strategy Ole Hansen said in a note.

In other metals, spot silver fell 0.5% to $24.74 per ounce, but was set for its biggest weekly gain since March.

Platinum was down 0.2% to $970.47 and palladium dipped 1.1% to $1,280.57, but both were poised for a second consecutive weekly rise.