Gold prices dipped on Friday, but still hovered near a three-week high, as the U.S. dollar index bounced from a three-year low and investors worried that U.S. inflation could heat up.
The U.S. dollar limped up off a three-year low against a basket of currencies but still was headed for its biggest weekly loss in nine months as negative sentiment offset any support from rising Treasury yields.
Spot gold was 0.3 percent lower at $1,348.58 per ounce by 2:21 p.m. EST (19:21 GMT), off a three-week peak of $1,361.76 in early trade. U.S. April gold futures settled up $0.9, or 0.1 percent, at $1,356.20 per ounce. Spot gold has risen 2.4 percent so far this week, putting it on track for its biggest weekly rise since October 2017.
“Gold is down on the stronger dollar today,” Michael Ellingston trader at U.S. Global Investors in San Antonio. “The dollar broke through its earlier highs and rose more.”
Gold was little changed for much of the session, but the rising dollar caused some consolidation, said David Meger, director of metals trading at High Ridge Futures. “But there are still some inflationary concerns in the market. The overall trend in the dollar remains to the downside even though we are rebounding today,” Meger said.
Fear that weakness could return to equities is also sparking safe-haven demand of gold, he added. While gold prices have surged in dollar terms, gold has fared less well in other currencies, up 1 percent when priced in euros and 1.4 percent in sterling.
The dollar has been reeling, with investors wary Washington might pursue a weak-dollar strategy. Other countries are considering tighter monetary policy, which could erode the yield advantage of U.S. fixed-income assets.
On the physical side of the gold market, demand in Asia was muted by the Lunar New Year holiday. In India, physical gold sold at a discount for the first time in three weeks as demand slumped. Demand was down to a quarter of usual levels as buyers were deterred by the recent price rise, said Harshad Ajmera, owner of wholesaler JJ Gold House in Kolkata.
Among other precious metals, silver was down 1.3 percent at $16.66 per ounce, still poised for a 2 percent weekly rise. Platinum gained 0.2 percent at $1,003.24 an ounce, after hitting its highest since Jan. 29 at $1,012.70. It was set for a 4.3 percent weekly increase.
Palladium was up 2.3 percent at $1,040.97 an ounce. It has risen 6.8 percent this week, its biggest weekly increase since October.