Gold expected to register weekly decline on surging T-yields

Under pressure from high Treasury yields, gold fell on Friday and was on track for a weekly decline as investors anticipated US inflation data the next week for further hints about when the Fed will decrease interest rates.

At 10:16 a.m. ET (15:16 GMT), spot gold was down 0.4% at $2,025.49 per ounce, and it had dropped 0.4% for the week. At $2,040.30 an ounce, US gold futures likewise saw a 0.4% decline. Gold is trading at $2021.75 per ounce at the time of writing.

The non-yielding precious metal became less appealing to investors as the yield on US Treasury bonds increased to a two-week high and a nearly two-month high for the two-year bond.

Most central banks will most likely follow the Fed’s lead if it decides to maintain higher rates for an extended period of time. The floor support for gold is still rather solid at $1,960, and analysts do not anticipate that gold will fall below this level.

This week, a number of Fed officials, including Chairman Jerome Powell, stated that before lowering rates, they needed further proof that inflation would continue to fall.

Revisions to official statistics released on Friday indicate that US monthly consumer prices increased less in December than first anticipated. Now, traders are waiting for the U.S. consumer price index (CPI) for January, which is anticipated on Tuesday.

The CME Fedwatch tool, opens new tab, gives traders a 62% chance of an interest rate drop in May. The opportunity cost of owning non-yielding bullion is reduced by lower interest rates.

In other news, platinum dropped 1.3% to $873.97 and palladium dropped 2.9% to $861.06 per ounce. Both metals’ prices were about to take another weekly tumble.

Palladium prices, an auto-catalyst metal, dropped below those of platinum on Thursday for the first time since April 2018. At $22.61, spot silver increased 0.1%.