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Investing.com - Gold prices pulled back from three-week highs on Friday as the dollar rebounded against a currency basket, but losses were held in check as the dollar remained near multi-year lows.
Gold futures for April delivery settled down 0.41% at $1,349.70 on the Comex division of the New York Mercantile Exchange after hitting the highest level since January 25 at $1,364.40 earlier.
For the week, prices were up 3.08% and remain near their highest level since August 2016.
A stronger dollar makes gold more expensive for overseas buyers. The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was up 0.63% to 89.03 in late trade, having earlier sunk to a three year low of 88.15.
For the week, the index was down 1.46%, marking its fifth weekly decline in the past seven weeks.
Expectations for a faster rate of monetary tightening outside the U.S., which would lessen the divergence between the Federal Reserve and other central banks has eroded the dollar’s relative yield attraction for investors.
The greenback has also been hit by concerns that recent tax cuts will negatively impact the U.S. fiscal deficit, which is projected to balloon to near $1 trillion in 2019.
The declines in the dollar came despite expectations for a faster pace of rate hikes by the Fed this year after data on Wednesday showing a stronger-than-expected increase in U.S. inflation in January.
Although gold struggles to compete with yield-bearing assets such as Treasury’s when borrowing costs rise, some analysts said the factors that drove the uptick in inflation were cyclical, meaning growth in inflation is likely to be gradual.
Elsewhere in precious metals trading, silver dropped 1.17% to $16.60 a troy ounce, but ended the week with gains of 1.78%.
Platinum settled at $1,008.80, up 0.77% for the day and was up 4.19% for the week.
Among base metals, copper for March delivery was down 0.2% at $3.239 in late trade. Trade remained subdued amid the Chinese Lunar New Year holiday. China is the world’s largest consumer of industrial metals.
In the week ahead, investors will focus on minutes of the Fed’s latest policy meeting with hopes the central bank will give more hints on the pace of future rate hikes this year.
Staying in the U.S., a report on existing home sales will be the highlight of the holiday-shortened week. Markets stateside will remain closed on Monday for the President's Day holiday.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.