Gold traded little changed, heading for a weekly drop, after a regional US Federal Reserve president said high inflation might call for the US central bank to tighten its monetary policy next year.
It could be appropriate for the Fed to begin increasing interest rates next year given a forecast for inflation above the US central bank’s 2 percent target, St Louis Fed President James Bullard said.
“I put us starting in late 2022,” Bullard said on Friday during a TV interview on CNBC, referring to interest-rate projections published on Wednesday by the US central bank after a two-day policy meeting.
Higher rates dampen demand for non-interest-bearing gold as an alternative asset.
The Bloomberg Dollar Spot Index advanced to a more than two-month high after Bullard’s comments, hurting demand for greenback-denominated bullion.
Gold posted its biggest weekly loss in 15 months, weighed down by concerns over tighter monetary policy.
Still, US Fed Chair Jerome Powell has cautioned that discussions about raising interest rates would be “highly premature.”
The central bank also signaled it was alive to threats of runaway price increases sparked by persistently higher-than-forecast inflation readings.
“Absent inflation expectations threatening to become unanchored — with the Fed unwilling or unable to calm things — gold will struggle to return to a bull market,” Macquarie Group Ltd strategists wrote in a note.
The bank expects gold to slide to US$1,600 an ounce by the end of the year.
Having broken through several key technical levels in just two days, prices would probably struggle to mount a quick recovery, Commerzbank AG analyst Carsten Fritsch said.
Spot gold was down 0.61 percent at US$1,762.63 per ounce, with prices down about 5.7 percent on the week, the most since March last year.
Gold for August delivery fell US$5.80 to $1,769 an ounce.
‧ Silver for July delivery rose US$0.11 to US$25.97 an ounce and July copper fell US$0.02 to US$4.16 a pound.
Additional reporting by agencies
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