Weekly drop in gold under pressure from a strong dollar and US rate expectations

Gold prices fell on Friday and are headed for a weekly decline, under pressure from a stronger dollar and growing expectations that the Federal Reserve (the US central bank) will keep interest rates higher for longer to fight inflation.

Spot gold dropped 0.2% to $4,270.40 an ounce, and is down more than 2% so far this week. US gold futures rose 0.2% to $4,304.80.

The dollar is on track for weekly gains, making dollar-priced metals more expensive for holders of other currencies.

Two US central bank policymakers said the bank will likely have to raise rates again to curb unacceptably high inflation. This comes a week after the bank raised rates by a quarter percentage point.

Although gold is typically seen as an inflation hedge, higher interest rates curb demand for it because they bolster the appeal of yield-bearing assets.

Data showed initial jobless claims in the United States remained last week close to their lowest level in 57 years, suggesting the labor market has regained momentum after struggling through much of the summer and is overcoming headwinds from the Middle East conflict.

Sources familiar with the matter said US and Iranian negotiators in New York are exploring a gradual path to end the war that would include Tehran reopening the Strait of Hormuz and Washington lifting the economic blockade imposed on Iran.

Among other precious metals, spot silver fell 0.5% to $63.58, platinum was steady at $1,749.61, and palladium dropped 1.3% to $1,257.70.