Gold Heads for Its Biggest Weekly Loss in More Than a Year

(Bloomberg) — Gold traded little changed, heading for a weekly drop, after a regional Federal Reserve president said high inflation may call for the U.S. central bank to tighten its monetary policy next year.

It may be appropriate for the Fed to begin raising interest rates next year given a forecast for inflation above the U.S. central bank’s 2% target, St. Louis Fed President James Bullard said. “I put us starting in late 2022,” Bullard said Friday during a TV interview on CNBC, referring to interest-rate projections published Wednesday by the U.S. central bank after a two-day policy meeting. Higher rates dampen demand for non-interest-bearing gold as an alternative asset.

The Bloomberg Dollar Spot Index advanced to a more than two-month high after Bullard’s comments, hurting demand for greenback-denominated bullion.

Gold is headed for its biggest weekly loss in 15 months, weighed down by concerns over tighter monetary policy. Still, Fed Chair Jerome Powell has cautioned that discussions about raising interest rates would be “highly premature.” The central bank also signaled it was alive to threats of runaway price increases sparked by persistently higher-than-forecast inflation readings.

“Absent inflation expectations threatening to become unanchored — with the Fed unwilling or unable to calm things — gold will struggle to return to a bull market,” strategists from Macquarie Group Ltd. wrote in a note. The bank expects gold to slide to $1,600 an ounce by the end of the year.

Having broken through several key technical levels in just two days, prices will probably struggle to mount a quick recovery, said Commerzbank AG analyst Carsten Fritsch.

Spot gold rose less than 0.1% to $1,774.04 an ounce at 2:08 p.m. in New York. Prices are down 5.5% this week, the most since March 2020.

Futures for August delivery on the Comex fell 0.3% to settle at $1,769. Spot silver was little changed, while platinum and palladium slipped. The Bloomberg Dollar Spot Index added 0.3% to extend this week’s gain to about 2%.

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