Gold lost its luster on Friday, with prices heading into their worst week since November following the strength of the dollar even as the conflict between Russia and Ukraine continues to escalate.
But the theme of deeper volatility held out all week, even as an increase in flight-to-safety betting helped the dollar hurt precious metal demand internationally.
Spot gold fell 0.5 percent to about $1,9300 an ounce, and US gold futures fell 0.5 percent to about $1,930.
“This – gold and the dollar – are very choppy, headline-driven markets, so we could see a lot more action in both directions throughout the day,” Craig Erlam, senior market analyst at OANDA, told Reuters, who reported clear progress in Russia added. Negotiations over Ukraine were essentially behind gold’s weekly dip.
Gold has lost more than 2.5 percent this week as markets rush to reprice the US Federal Reserve’s rate hike trajectory after central bank projections based on the point charts showed policymakers they had planned six rate hikes for this year. .
Gold is usually used to hedge during an economic crisis and high inflation scenarios. Still, higher interest rates and the projected interest rate differential between the US and the rest of its competitors is expected to keep the dollar favorable.
Although the yellow metal recovered somewhat after the Fed said it raised borrowing costs on expected lines, the central bank acknowledged the risk of rising inflation as oil supply concerns continue amid the escalating conflict between Russia and Ukraine.
“Gold will remain well supported. As demand for safe havens and inflation hedges remains strong,” said Mr Erlam, we could see more and more dips being bought.
Spot palladium rose more than 2 percent to about $2,570 an ounce, but was projected to fall nearly 9 percent weekly as fears over supplies from top producer Russia eased as well.
Meanwhile, China’s intent to tackle COVID-19 with minimal impact on the economy and people’s lives, and the promise of further stimulus, have put palladium bulls back on the table, said Matt Simpson, senior market analyst at City Index.
This follows many sessions of volatile price action that saw platinum, palladium and major metals fall to technical support levels after sharp rallies.