Gold falls amid growing prospect of more US rate hikes

Gold recorded a third straight weekly loss as a higherthan-expected US inflation reading raised bets that interest rates would stay higher for longer. The afternoon fixing on Friday in London was $1,947.90 an ounce, compared with $1,961.60 a week earlier. Thai selling prices were quoted at 32,100 baht per baht-weight (15.2 grammes), down 100 baht from the previous week.

Gold attracted safe-haven interest amid concerns about US debt-ceiling talks, though the White House and congressional Republicans said they were getting closer to an agreement.

“Despite positive noises coming from DC, a debt deal may still be difficult to get through before June 1,” said Tai Wong, a New York-based metals trader.

But short-term players expect a deal to be done and “have been selling behind inflation data that suggests a June hike is possible”, Wong added.

The personal consumption expenditure index, which the Fed tracks for its 2% inflation target, increased 4.4% in the 12 months through April after advancing 4.2% in March.

“The PCE number just kicked one of the legs out on the stool of the gold market … a softer number would have provided the tailwind behind gold,” said Phillip Streible, chief market strategist at Blue Line Futures.

Traders are now betting the Fed will deliver an 11th straight rate hike in June, which would erode the attraction of gold.

In the physical market, Indian dealers were charging premiums, as retreating domestic prices boosted buying. As well, the Reserve Bank of India said 2,000-rupee banknotes would be withdrawn from circulation by the end of September.

“Demand was good this week as some consumers were trying to use 2,000-rupee notes to buy gold,” said a Mumbaibased dealer.

In China, dealers remained cautious even as the yuan rebounded from a six-month low against the dollar.

But independent analyst Ross Norman said demand remained firm for high-end jewellery in the country.