Gold edges up as dollar rally cools, traders eye more Fed cues

By Arpan Varghese

(Reuters) – Gold ticked up on Friday buoyed by a slight retreat in the dollar, while investors hunkered down for more economic data next week to gauge the Federal Reserve’s interest rate hike plans.

Spot gold inched 0.1% higher at $1,920.49 per ounce by 2:06 p.m. EDT (1806 GMT). U.S. gold futures settled little changed at $1,942.70.

The dollar, however, is bound for its longest weekly winning streak since 2014, propelled by recent strong U.S. economic data. The greenback’s overall strength put bullion on course for its first weekly dip in three. [USD/]

Focus is now on U.S. inflation readings due on Sept. 13, and the Fed’s policy decision on Sept. 20.

While there’s still significant investment in the dollar and Treasuries, there’s also plenty of safe-haven buying in gold and that’s supporting prices, said George Milling-Stanley, chief gold strategist at State Street Global Advisors.

Even if CPI numbers look good, the Fed’s preferred gauge — the personal consumption expenditures price index — is still very sticky, “so if we get a recession or a period of slow growth amid continued high inflation, it could lift gold above the pack of other safe havens”, Milling-Stanley added.

Traders saw around a 93% chance of the Fed keeping rates unchanged in September and 43% odds of one more hike before 2024, according to the CME FedWatch tool.

Higher rates dull appetite for zero-yield gold. [US/]

However, if the Fed ends up needing to hold longer, “that becomes the worst of all possible worlds for gold”, said Ilya Spivak, head of global macro at Tastylive.

In physical gold markets, top consumer China’s economic support measures drove some demand optimism. [GOL/AS]

Silver fell 0.1% to $22.93 per ounce, while platinum dropped 1.2% to $892.26. Both are headed for weekly falls.

Palladium fell 1.5% to $1,193.51.

(Reporting by Harshit Verma in Bengaluru; Editing by Shilpi Majumdar and Andrea Ricci)