Gold prices slipped on Friday, hurt by a strengthening dollar as some investors bet that recent spikes in U.S. consumer prices are temporary.
Spot gold fell 1.2% to $1,875.31 per ounce by 2:01 p.m EDT (1801 GMT). U.S. gold futures settled 0.9% lower at $1,879.6.
The dollar index gained 0.6%, dimming gold’s appeal to investors holding other currencies.
TD Securities commodity strategist Daniel Ghali said gold’s failure to break above $1,900 per ounce after U.S. non-farm payrolls and CPI data suggests inflation hedging flows were slowing at the same time as physical flows were weakening.
“As a result a pullback in gold should unfold,” Ghali said, adding that while there could be a near-term pullback to $1,850 per ounce, gold in the medium-term should be supported by dovish central bank policies for a prolonged period of time.
Data on Thursday showed U.S. consumer prices rose sharply in May, but analysts say the spike is likely “transitory” and therefore fears over the Federal Reserve policy tightening have ebbed.
On the physical front, dealers in top-hubs India and China were forced to offer discounts to lure customers this week.
Market participants now eye next week’s U.S Federal Reserve policy meeting.
Expectations that the Fed will stick to the “inflation is transitory script” are high, but recent labor market improvements and a “red-hot” inflation number raise the risk that the Fed will be less dovish, Edward Moya, senior market analyst at OANDA, wrote in a note.
Palladium rose 0.2% to $2,783.10 per ounce and platinum fell 0.3%, to $1,147.08 per ounce.
Automobile companies had likely already anticipated the impact of the global semiconductor shortage and replenished their inventories of autocatalyst metals platinum and palladium, limiting its impact on price, Ghali said.
Platinum and palladium are used as catalysts in vehicles to reduce emissions.
Meanwhile, silver was steady at $27.96 an ounce. (Reporting by Nakul Iyer in Bengaluru; Editing by Kirsten Donovan, Will Dunham and Jonathan Oatis)