Title: Gold faces fourth weekly loss as dollar rally saps appeal

May 13, 2022 04:25AM ET

By: AnalysisWatch

Gold prices hovered near a three-month low on Friday, on track for their fourth straight weekly decline as the strongest dollar in two decades dampened demand for the green precious metal.

In choppy trading, spot gold was down 0.1% at $1,823.40 per ounce in choppy trading. Earlier, it hit its lowest level since Feb. 7. U.S. gold futures were unchanged at $1,824.60.

"Gold's break through support at $1,835.00 an ounce and the sell-off in other precious metals overnight leaves it vulnerable to deeper losses and a possible test of support at $1,780.00 an ounce," said Jeffrey Halley, senior analyst at OANDA.

The dollar steadied near a fresh 20-year high on Thursday as fears persisted that Federal Reserve action to curb inflationary pressures would slow global economic growth, boosting the currency's safe-haven appeal.

Gold prices have lost about 3% so far this week, the most in two months.

Last week, the Federal Reserve raised its benchmark overnight interest rate by an aggressive half percentage point.

Precious metals are sensitive to rising U.S. short-term interest rates and bond yields, which increase the opportunity cost of holding precious metals.

"Nominal yields will also rise, which is a double whammy for gold investors, as the U.S. Federal Reserve will remain tight until inflation indicators fall," said Stephen Innes, managing partner at SPI Asset Management.

The recent slide in gold prices has wiped out most of the gains made by safe-haven demand in anticipation of and after Russia's invasion of Ukraine in February. The conflict drove gold prices to record-high levels by mid-March.

Spot silver rose 1% to $20.86 per ounce, but is down 6.6% for the week, the most since late January.

Platinum was up 1.7% at $959.45 an ounce and palladium was up 2.8% at $1,961.13 an ounce, although both were on track for weekly losses.