Gold set for worst week since March 2020 after hawkish Fed

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Gold prices edged higher on Friday, but were on track for their worst week since March 2020 after the U.S. Federal Reserve’s hawkish message on monetary policy bolstered the dollar and bond yields, while denting bullion’s appeal as an inflation hedge.

FUNDAMENTALS

* Spot gold was up 0.3% at $1,779.11 per ounce, as of 0100 GMT. However, prices have fallen 5.2% so far this week.

* U.S. gold futures edged 0.2% higher to $1,779 per ounce.

* The dollar index hit a two-month high and was headed for its best week in nearly nine months, making gold more expensive for holders of other currencies.

* The benchmark 10-year yield held firm above 1.50%, increasing the opportunity cost of holding non-interest bearing gold.

* Fed officials have begun telegraphing an exit from the central bank’s extraordinarily easy monetary policy that so far is smoother and signaled to be speedier than when the reins were tightened after the last crisis.

* Higher interest rates will dull gold’s appeal as they translate into a higher opportunity cost of holding it.

* Indicative of sentiment, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.4% to 1,041.99 tonnes on Thursday.

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* A sharp spike in energy prices and more expensive services boosted euro zone consumer inflation in May as expected, data confirmed on Thursday, taking the rate of price growth just above the European Central Banks target.

* The Bank of Japan is expected to maintain its massive stimulus and may extend a deadline for its pandemic-relief program at the end of its two-day policy meeting on Friday.

* The White House will consider arranging talks between U.S. President Joe Biden and his Chinese counterpart, Xi Jinping, as the two countries spar over issues including human rights, a top U.S. official said.

* Silver rose 0.7% to $26.12 per ounce, palladium gained 0.7% to $2,513.88, while platinum climbed 1% to $1,068.40.

DATA/EVENTS (GMT) 0600 UK Retail Sales MM, YY May 0600 UK Retail Sales Ex-Fuel MM May (Reporting by Brijesh Patel in Bengaluru, Editing by Sherry Jacob-Phillips)