Gold prices rallied 1% on Friday after the dollar retreated, but the metal was set to end the month lower on bets of aggressive policy tightening by the U.S. Federal Reserve.
Spot gold was up 0.9% at $1,911.14 per ounce by 1752 GMT. However, it was on course to post a decline of 1.4% in April, its first monthly drop since January.
U.S. gold futures settled up 1.1% at $1,911.70 per ounce.
“Gold market has seen consistent sell-off in the past weeks as the dollar rallied. Currently, the dollar index has declined, which is lifting gold prices,” said Edward Meir, an analyst with ED&F Man Capital Markets.
The dollar index fell 0.7% after touching a 20-year high on Thursday, making gold less expensive for those holding other currencies.
Further lifting bullion’s appeal, data showed the U.S. economy unexpectedly contracted in the first quarter amid a resurgence in COVID-19 cases and drop in pandemic relief money from the government. read more
U.S. labour costs surged by the most in 21 years in the first quarter, pointing to rising wage inflation and supporting the Federal Reserve’s aggressive monetary policy stance. read more
“The GDP data and the cost index for employment data showed that inflation still running fairly hot, this is generally supportive for gold,” Meir said.
Gold is considered a hedge against soaring inflation and uncertainties, but rising interest rates dampen its appeal by increasing the opportunity cost of holding the non-interest bearing asset.
The markets focus now shifts to the U.S. central bank’s two-day policy meeting starting on May 3, with officials expected to increase the target policy rate by half a percentage point. read more
Spot silver fell 0.3% to $23.06 per ounce, while platinum advanced 2.5% to $942.36. Both metals were set to post a monthly fall.
Palladium rose 3.9% to $2,317.97 per ounce.