(Bloomberg) -- Gold is headed for its first weekly loss in six as investors booked profits after the metal's months-long rally.
Bullion has gained about 17% since a low in mid-February, hitting a series of new peaks despite fading expectations for easing policy from the Fed. That shift has aided the dollar and Treasury yields, which traditionally act as drags on bullion. Fresh inflation data released Friday reinforced the view that high interest rates are here to stay for now.
The metal's robust performance has been linked to central-bank buying, surging interest in some Asian markets including China, and the possibility that investors may be seeking protection against sticky inflation.
Gold is “suffering a long overdue and relatively aggressive, but healthy correction,” said Ole Hansen, head of commodity strategy at Saxo Bank AS.
The Fed's preferred gauge of underlying inflation climbed 0.3% in March and 2.8% from a year earlier, the same as the prior month. Figures from earlier this year were also revised up slightly, government data showed Friday.
The three-straight months of worrisome inflation data indicate progress toward the central bank's 2% goal has stalled, and suggest the first interest-rate cut is getting pushed further out. Investors see one to two rate cuts this year, beginning in November, but concerns are growing the Fed may not lower borrowing costs at all in 2024.
“It should be noted that traders are pricing ongoing better-than-expected data, that is why there was very limited gold reaction to the higher inflation and data today,” said Bart Melek, global head of commodity strategy at TD Securities. Once US data surprises to the downside, gold should see investor interest in the Western world — with that, along with China uptake, a move toward $2,500 or higher “would be reasonable,” he said.
Spot gold, which most recently reached an intraday record two weeks ago, traded up 0.2% at $2,336.08 an ounce as of 12:33 p.m. in New York. That takes its decline this week to 2.3%, the biggest since December. The Bloomberg Dollar Spot Index was up 0.3%. Silver, platinum and palladium all slipped.
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