Spot Gold retreated to a fresh three-week low on Friday and looked set for a second straight week of losses, pressured by rising US bond yields and firm US Dollar in light of hawkish remarks from Federal Reserve officials.
10-year US Treasury yields rose to highs not seen since June 2008 and the US Dollar remained elevated, making dollar-priced Gold less attractive for international investors.
There could be more downside for Gold, as “the Fed is only about halfway through their tightening cycle and there’s probably more room for rates to go up,” according to Stephen Innes, managing partner at SPI Asset Management.
Despite that Gold is largely considered as a good hedge against inflation and economic uncertainty, rising interest rates tend to increase the opportunity cost of holding the yellow metal, which pays no interest.
Still, “most of the headwinds are already priced in, and this will provide a floor to gold prices at around $1,580-$1,620 zone,” according to Sugandha Sachdeva, vice president of commodity and currency research at Religare Broking.
As of 9:34 GMT on Friday Spot Gold was edging down 0.27% to trade at $1,623.75 per troy ounce. Earlier on Friday, the yellow metal went down as low as $1,617.28 per troy ounce, which has been its weakest price level since September 28th ($1,614.92 per troy ounce).
Gold has retreated 1.30% so far this week, following another 2.98% loss in the previous week.
Gold futures for delivery in December were losing 0.56% on the day to trade at $1,625.42 per troy ounce, while Silver futures for delivery in December were down 2.13% to trade at $18.290 per troy ounce.
The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was gaining 0.58% to 113.506 on Friday. Earlier today, the DXY climbed as high as 113.526, which has been its strongest level since October 13th (113.920).