Gold subdued as US data backs Fed rate stance

Gold edged lower on Friday as robust US economic data was seen as fodder for the Federal Reserve to keep interest rates high for longer, but caution ahead of inflation data and the policy meeting next week put a floor under bullion prices.

Spot gold was down 0.2 per cent at $1,926.09 per ounce, as of 0944 GMT, but held a relatively tight range after retreating nearly 1 per cent in the previous session following the US data.

US gold futures eased 0.1 per cent to $1,927.30.

The US GDP numbers are “prompting speculation that even though inflation is starting to look a little bit more benign, the Fed will probably have to keep rates higher for longer,” pressuring gold, said Michael Hewson, chief markets analyst at CMC Markets.

Data on Thursday showed the US economy grew faster than expected, but most economists expect a recession by the second half of the year, though a short and mild one compared to previous downturns because of extraordinary labour market strength.

The dollar index, meanwhile, was largely steady, making greenback-priced bullion a less attractive bet.

Investors are keeping a close eye on the central bank’s two-day policy meeting next week, with a 25-basis-point rate increase widely expected.

Gold, which pays no interest, tends to benefit when interest rates are low as it reduces the opportunity cost of holding bullion.

“However, this weakening of the rate hikes (by the Fed) has long since been priced into gold so it would take a move that doesn’t conform to expectations to significantly impact the gold price,” Kinesis Money analyst Rupert Rowling said in a note.

US personal consumption expenditures (PCE) data due at 1330 GMT is also on the radar.

Spot silver fell 0.7 per cent to $23.72 per ounce.

Platinum slipped 0.9 per cent to $1,009.38 and palladium lost 0.5 per cent to $1,668.69. Both metals were headed for a third straight weekly decline.