Gold prices fell on Friday, but were set for a second consecutive weekly gain, as the U.S. dollar tumbled and recent economic data prompted bets that the Federal Reserve is nearing the end of its rate-hike cycle.
Spot gold was down 0.3% at $2,033.90 per ounce. U.S. gold futures dipped 0.4% to $2,047.60.
For the week, gold prices are up more than 1%.
The dollar index slid to a one-year low this week, making bullion cheaper for buyers holding other currencies.
“The appetite to sell the U.S. dollar in the wake of soft inflation data, lower yields and calls for a lower terminal Fed rate have been a huge driver for gold,” said Matt Simpson, a senior market analyst at City Index.
Data this week showed the U.S. producer price index in March dropped the most since April 2020, while the consumer price index rose less than expected.
Moreover, the number of Americans filing new claims for unemployment benefits increased more than expected last week, signaling labor market conditions were loosening as higher borrowing costs dampened demand in the economy.
These readings, along with fears of a mild recession, have helped bullion gain about 1.8% so far this week.
The CME FedWatch tool shows markets are pricing in a 66.8% chance of a 25 basis-point hike in May, with rate cuts seen in the back half of the year.
“All eyes will be on U.S. retail sales, consumer sentiment and inflation expectations today,” said Simpson, adding gold could head towards its all-time high, should the data come in soft enough.
Gold is considered a hedge against inflation and economic uncertainties, but higher interest rates dim non-yielding bullion’s appeal.