By Deep Kaushik Vakil
(Reuters) – Gold was bound for its first quarterly decline in three, squeezed by expectations for more U.S. interest rate hikes, while moderate inflation prints provided some support on Friday.
Spot gold rose 0.5% to $1,917.94 per ounce by 01:46 p.m. EDT (1746 GMT). U.S. gold futures settled 0.6% higher at $1,929.40.
Prices have shed 2.5% this quarter, dropping from levels just shy of all-time highs at $2,072 in May, caused by nervousness about the health of the U.S. banking sector, to below $1,900 on Thursday.
The banking crisis “brought the 10-year yield lower because it was thought that the Fed was going to have to stop raising rates … that all got thrown out the door with the last rate hike (pressuring gold),” said Daniel Pavilonis, senior market strategist, RJO Futures.
The dollar index and 10-year Treasury yields were both set to gain this quarter, eroding gold’s appeal for investors holding other currencies. [USD/] [US/]
U.S. consumer spending stagnated in May, while the Fed’s preferred personal consumption expenditures index rose at a year-on-year pace of 3.8%, easing from April’s 4.3% pace.
Gold prices rose after the data, as traders bet the Fed was slightly less locked in to a July interest rate hike, trimming its chances to 84% from nearly 90% earlier.
Rate hikes lift bond yields and in turn raise the opportunity cost of holding non-yielding bullion.
“In the short term, the prospect for more US rate hikes combined with rising US real yields to or near cycle highs may pose a continued challenge to gold,” Saxo Bank head of commodity strategy Ole Hansen said in a note.
Silver rose 0.8% to $22.73 per ounce. Platinum gained 0.6% to $899.27, but was set for its biggest monthly decline in two years.
Palladium fell 0.1% to $1,227.79, and was headed for its third quarterly fall.
(Reporting by Deep Vakil in Bengaluru; editing by David Evans, Shinjini Ganguli and Barbara Lewis)
