Gold eased on Friday as the dollar firmed on bets for interest rate increases but bullion still held above the pivotal $1,750 technical support level en route to a small weekly gain as worries about rising inflation and growth hurt risk sentiment.
Spot gold fell 0.2% to $1,753.67 per ounce by 0915 GMT. US gold futures eased 0.2% to $1,754.30.
The dollar held close to its highest level of the year, making gold more expensive in other currencies.
But bullion was up about 0.2% on the week as a retreat in the dollar on Thursday helped it bounce about 2%.
“Even though it doesn’t feel and look like it, gold has actually had a phenomenally strong week,” considering the strong moves in the dollar and yields, the “normal negative drivers,” Saxo Bank analyst Ole Hansen said.
“Anyone trying to convince market participants that inflation is not here, that’s a fool’s game,” and with soaring energy prices due to a crunch in China and Europe likely to hit growth and earnings, that will leave us with a volatile October and, in turn, support gold, Hansen added.
Providing a floor to gold, European stocks fell following a slide in Wall Street and Asia on expectations that euro zone inflation could jump, amid slowing economic growth.
But prospects that the US Federal Reserve may still wind down economic support this year continued to pressure gold, some analysts said, since reduced stimulus and higher interest rates tend to push government bond yields up, raising gold’s opportunity cost.
“While some investors are gripped with fear of lower gold prices, we’re seeing many contrarian long-term investors buying gold to hedge against inflation and economic risks,” said Vincent Tie, sales manager at Singapore dealer Silver Bullion.
Silver was up 0.1% at $22.22 per ounce, platinum rose 0.2% to $965.11, while palladium fell 0.6% to $1,898.55.
(Reporting by Arpan Varghese and Nakul Iyer in Bengaluru Editing by Mark Heinrich, Robert Birsel)