Gold prices saw a slight decrease on Friday, extending losses for a third consecutive session, as stronger-than-anticipated U.S. inflation and labor market data heightened concerns of more Federal Reserve rate hikes. The yellow metal failed to retake the level in recent sessions and is now set to end the week below $2,000. On Thursday, gold plummeted while Treasury yields soared, following data that revealed personal consumption expenditures prices read much higher than expected in the first quarter of 2023. Despite the Fed's expectations of some cooling, initial jobless claims unexpectedly fell over the past week, indicating a strong labor market. The data fueled concerns that inflation will remain high in the coming months, attracting more policy tightening by the Fed, which is not favorable for non-yielding assets such as gold.
Spot gold fell 0.1% to $1,985.79 an ounce, while gold futures fell 0.2% to $1,994.85 an ounce by 20:58 ET (00:58 GMT). The softer-than-expected first quarter U.S. GDP data showed that the economy was cooling under high interest rates and inflation. However, the Fed signaled that it was willing to risk a mild recession to curb high inflation, and thus it may still have enough headroom to hike rates. The central bank is widely expected to raise interest rates by 25 basis points when it meets next week, with any signals on the future of monetary policy being closely watched.
Although gold may face increased demand later this year, especially if the U.S. economy slips into recession and the Fed pauses its rate hike cycle, the current scenario is not favorable for the yellow metal. On the other hand, other precious metals, including platinum and silver, drifted lower on Friday. Among industrial metals, copper prices weakened and were set for steep losses this week as fears of slowing economic growth weighed. Chinese data showed that industrial profits shrank more than expected in the first quarter, furthering the notion of an uneven economic recovery in the world's largest copper importer.
