Gold prices remained close to one-year highs on Friday, fueled by recent US economic data that suggested the Federal Reserve may be nearing the end of its rate-hiking cycle. This drove non-yielding bullion towards a second consecutive weekly increase. Spot gold was last down 0.78% at $2,023.77 per ounce, with prices just below last session’s high since March 9, 2022. Meanwhile, US gold futures fell 0.87% to $2,037.40.
The opportunity cost of holding gold has risen as bond yields increase, according to Peter Fertig, an analyst with Quantitative Commodity Research. Eurozone yields were nearing a month-high, with the focus shifting to the European Central Bank’s tightening path. However, the Federal Reserve considered pausing rate hikes in March due to the unexpected collapse of two US regional lenders. Despite this, inflationary pressures took precedence, pushing bullion over the $2,000 mark.
Gold is often seen as a hedge against inflation and economic uncertainty, but higher interest rates can diminish the appeal of non-yielding bullion. “Gold is placed in a solid positive trend and the first resistance zone is placed at $2,070-$2,075, on the historical high, reached in March 2022,” said Carlo Alberto De Casa, external analyst at Kinesis Money, in a note. Capping gold’s losses, the dollar slid to a one-year low following data this week that showed the consumer price index rose less than expected, which bolstered hopes for a Fed pause in rate hikes.