Gold set for best week since April on dollar drop

Gold prices were set on Friday for their biggest weekly gain since April, after rallying close to a one-month high, as markets scale back expectations of further US interest rate hikes, sending the dollar to its lowest in more than a year.

Spot gold was little changed at USD 1,959.81 per ounce by 0504 GMT, and up 1.9% for the week. US gold futures GCcv1 were flat at USD 1,964.00.

Making gold less expensive for overseas investors, the dollar index touched its lowest level since April 2022.

Gold’s got room to sort of expand from here, said Matt Simpson, a senior market analyst at City Index, adding that the next major levels could be USD 1,985 to USD 2,000.

Data on Thursday showed US producer prices barely rose in June, providing more evidence the economy had entered a disinflation phase.

Meanwhile, the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, indicating the US labor market remained tight.

Federal Reserve Governor Christopher Waller said on Thursday he’s not ready to call an all clear on US inflation and favors more rate hikes this year, saying the upcoming July meeting should bring an increase.

Markets have mostly priced-in another rate hike from the Federal Open Market Committee at its July 25-26 meeting, but expectations of further increases have dropped.

However, if the Fed does indicate more rate increases, “that could provide some nervousness (among gold investors)” Simpson added.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

“The near-term range looks to have shifted higher. There is now some decent support around the USD 1,940 level, while resistance awaits in the USD 1,970-75 region,” Tim Waterer, chief market analyst at KCM Trade, said.

Spot silver fell 0.2% to USD 24.8091 per ounce, but was set for its biggest weekly gain since March.

Platinum shed 0.4% to USD 969.08 and palladium dropped 1.1% to USD 1,280.62, but were poised for a second straight weekly rise.

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Krishna Chandra Eluri, Sherry Jacob-Phillips and Sonia Cheema)