Gold Heads for Third Weekly Loss on Dollar, Hawkish Fed Signals

Gold is headed for a third straight weekly loss. The dollar held at two-week highs. Federal Reserve officials maintained a cautious tone on rate cuts.

A stronger dollar makes gold more expensive for non-U.S. buyers. The prospect of rates staying elevated reduces the metal's appeal relative to yield-bearing assets. The combination has erased a chunk of the gains from the rally that carried gold to fresh records earlier this year.

Fed speakers this week reiterated the case for patience. Several said they need more evidence that inflation is sustainably moving toward the 2% target before lowering rates. Markets have responded by dialing back bets on an early cut. The probability assigned to a September reduction has fallen in recent days.

Central bank buying has been one pillar of support. Several emerging-market central banks continued to add to reserves in recent months. That source of demand has not been large enough to offset the macro pressure.

ETF flows reflect the shift in sentiment. Holdings in major gold-backed exchange-traded funds have edged lower this month. Investors are reducing exposure in the face of higher opportunity costs.

The dollar has gained against major currencies this week, adding to the headwind for gold. Silver also fell, tracking gold lower. The white metal has faced similar pressure from the macro backdrop.

The next data point that could change the narrative comes next week with U.S. jobs figures. A softer print would revive expectations for rate cuts and likely push gold higher. A strong number would reinforce the current pressure. Downside pressure remains the baseline. Some traders see central bank buying as a potential floor. A break below recent support levels could still accelerate selling.