Gold Retreats as Dollar Approaches Its Highest Levels

SadaNews Economy - Gold continued its losses on Friday, after dropping nearly 2 percent in the previous session, amidst a renewed rise in Brent crude above $100 a barrel, raising concerns about inflation and bolstering expectations for interest rate hikes ahead of next week's Federal Reserve meeting.

The spot gold price fell 0.5 percent to $4027.54 an ounce by 05:23 GMT, dropping more than $130 from its highest level in two weeks recorded on Wednesday. Meanwhile, U.S. gold futures for August delivery declined 0.5 percent to $4029.60 an ounce.

Despite these losses, gold is still on track to post a slight weekly gain of around 0.3 percent.

Brian Lan, managing director at Gold Silver Central, said: "We expect further volatility in the near term. Gold is currently trading in a range between $3980 and $4170, and it has remained confined within this range for weeks. Each time prices approach the $4000 level or dip slightly below it, we notice a strong return of buyers.".

Although gold is traditionally seen as a hedge against inflation, its appeal diminishes in an environment of rising interest rates, as it does not yield any returns.

Investors are also awaiting the Federal Reserve meeting next week, where expectations widely point towards keeping interest rates unchanged. However, the markets price in about an 81 percent chance of a hike in September, according to the FedWatch tool.

In Europe, the European Central Bank kept interest rates unchanged, as expected, but left the door open for a potential increase in September.

In other precious metals, silver fell 0.4 percent in spot trading to $57.48 an ounce, but it is still on track to achieve a weekly gain of about 3 percent.

Platinum also dipped 0.9 percent to $1585.50 an ounce, and palladium fell 1.5 percent to $1238.55, with both metals heading for weekly losses.

The Dollar..

The dollar received support from rising U.S. Treasury yields and hovered near a 40-year high against the yen, amid rising oil prices and a renewed global trade war, which heightened concerns about the re-emergence of inflationary pressures.

The British pound fell near its lowest level in three weeks, recording $1.3310 in Asian trading, after dropping about 0.5 percent in the previous session alongside a rebound in the dollar, according to Reuters.

The euro also faced pressure, stabilizing at $1.1381, despite continued expectations of an upcoming interest rate hike from the European Central Bank, while the dollar index maintained trading near its highest level in three weeks at 101.41.

The recent wave of dollar strength coincided with Brent crude returning to trade above $100 a barrel.