Gold falls on Fed rate hike prospects, on track for weekly dip

Nov 18 (Reuters) – Gold prices fell on Friday and were bound for a weekly dip following indications from US Federal Reserve officials that more interest rate hikes were due as the bank seeks to lower inflation.

Spot gold fell 0.7% to USD 1,748.84 per ounce by 2:08 p.m. ET (1908 GMT), set for a weekly decline of about 1.3%, its biggest since mid-October.

US gold futures settled down 0.5% at USD 1,754.4.

The slight pullback in gold after the recent rally has been through a technical retracement in the gold market, said David Meger, director of metals trading at High Ridge Future.

The pullback could continue going into next week’s December option expiration, which could cause a further consolidation in gold, Meger said, adding that the market overall seems focused on interest rate expectations from the Fed.

Federal Reserve Bank of Boston leader Susan Collins said on Friday the central bank has more rate rises ahead of it as it seeks to lower inflation, adding that a 75-basis point hike was still on the table.

The dollar index steadied, making gold more expensive for other currency holders, while benchmark US Treasury yields also edged higher.

While gold has shed 15% since its March peak after the Fed began tightening monetary policy, it has gained about 7% since the beginning of November as markets started pricing in a slower pace of rate hikes.

Markets currently see an 87% chance of a 50-bps hike at the Fed’s December meeting.

“Gold had been able to hold its own relatively well so far …(yet) a correction was always likely after its big move upward,” Fawad Razaqzada, market analyst at City Index, said.

Spot silver fell 0.3% to USD 20.90 per ounce, en route falling 3.7% for the week.

Platinum fell 0.4% to USD 976.67, seeing its biggest weekly fall since mid-September, while palladium dropped 3.3% to USD 1,940.14, also falling for the week.

(Reporting by Seher Dareen in Bengaluru; Editing by Shailesh Kuber, Shounak Dasgupta and Krishna Chandra Eluri)