Gold heads for third weekly loss as dollar strength, Fed rate hike bets weigh

Gold prices fell more than 2% on Friday and were headed for a third straight weekly decline, as a stronger US dollar and hawkish signals from the Federal Reserve reduced demand for the precious metal.

Spot gold was down 2.1% at $4,121.95 per ounce as of 0508 GMT, its lowest level since June 11. It has fallen 3.8% so far this week.

US gold futures for August delivery dropped 2.5% to $4,139.40.

The dollar rose to a one-year high, making gold more expensive for buyers using other currencies. Trading activity was thinner as markets in mainland China and Hong Kong were closed for the Dragon Boat Festival holiday.

Gold had briefly gained support from the US-Iran peace deal, but the move faded as investors focused on the Federal Reserve’s policy outlook under Chair Kevin Warsh.

Nine of the Federal Reserve’s 19 policymakers expect the central bank to raise interest rates this year. Traders now see an 87% chance of a US rate hike in December, up from 61% before the Fed decision, according to the CME FedWatch Tool.

Higher interest rates tend to weigh on gold because the metal does not offer any yield.

Goldman Sachs lowered its December gold price forecast to $4,900 per ounce from $5,400, saying it no longer expects a Federal Reserve rate cut this year.

On the geopolitical front, planned US-Iran talks scheduled for Friday at the Burgenstock resort in Switzerland will not take place, according to a Swiss foreign ministry statement.

Other precious metals also declined. Spot silver fell 3.9% to $63.25 per ounce, platinum lost 2.7% to $1,649.63 and palladium dropped 2.3% to $1,249.69.

All three metals were also on track to end the week lower.