Gold traded higher Friday after two days of losses, however it stayed on track for it’s biggest weekly slide in two months, on growing expectations for a Fed June rate hike and a stronger dollar. Spot gold traded up 0.2 percent at $1,257.11 an ounce, while U.S. gold futures for June rose $3.30 to $1, 258.10. Spot gold prices are down by 1.5 percent for the week of May 20, facing a third week straight of lows.
New York Federal Reserve President William Dudley said in a statement Thursday that there is a strong sense among central bank officials that markets were miscalculating the probability of policy tightening. This statement came just 24 hours after the Fed’s April meetings minutes were released, which revealed that the Fed felt a rate increase might be appropriate as early as June, launching gold into a three week low of $1,244. The metal has since bounced back, as concerns with economic growth lends support. Gold is very sensitive to interest rates.
“In a negative gold environment, gold prices would have been much lower after these Fed comments overnight,” said analyst Georgette Boele, of ABN Amro. “The fact that we are around current levels is a sign that investors are buying on dips and see weakness as an opportunity.”
Gold managed to rally 18 percent this year, especially as investors bet that the Federal Reserve would hold off from further rate hikes until late 2016. The dollar retreated from its highest in two months against the greenback, but is heading for a third week of gains, which pressures gold. Among other metals, silver rose 0.6 percent to $16.57, as platinum grew 1.5 percent at $1,024.40 and palladium 2.1 percent more at $566.10. Palladium is by far the biggest faller of the week of May 20th, down 4.7 percent.