Gold price set for third straight weekly drop on Fed rate hike prospects

Spot gold rose 0.5% to $1,887.01 per ounce by noon ET, continuing its recovery after slumping to a two-month low. US gold futures gained 0.5% as well, trading at $1,887.80 per ounce.

Meanwhile, the dollar index slipped 0.3% after hitting a 20-year high, making gold less expensive for overseas buyers.

But capping bullion’s upside, benchmark US Treasury yield strengthened near the key 3% level, with stronger-than-expected jobs data perceived as building the case for bigger interest rate hikes.

“Gold traders basically saw the non-farm payroll report as another confirmation the Fed is going to remain on cruise control with delivering point rate increases over these next couple of policy meetings,” Edward Moya, a senior analyst with OANDA, told Reuters.

The bond market sell-off would also continue to weigh on gold, Moya added.

However, Saxo Bank analyst Ole Hansen wrote in a note that overall, the outlook for gold was positive, “driven by the need to diversify from volatile stocks and bonds as inflation becomes increasingly imbedded and the ongoing geopolitical concerns.”

On Wednesday, the US central bank raised its benchmark rate by half a percentage point, the most in 22 years, although Chairman Jerome Powell explicitly ruled out raising rates by three-quarters of a percentage point in a coming meeting.