Gold prices rise as dollar softens, but on track for third weekly fall

By Eileen Soreng

(Reuters) - Gold prices rose on Friday as the dollar pulled back from recent peaks, but the precious metal faces a third consecutive weekly loss on bets that the Federal Reserve will retain its aggressive rate-hike stance.

Spot gold rose 0.4% to $1,702.49 per ounce by 0801 GMT, but was down about 2% for the week so far.

U.S. gold futures were up 0.3% at $1,714.80.

The dollar index dipped 0.2% but was not far from a 20-year peak scaled in the previous session as investors awaited U.S. labour data, that might influence expectations for U.S. interest rates. [USD/]

Weaker-than-expected data could temper expectations for higher rates and at least temporarily take some of the selling pressure off gold, said Stephen Innes, managing partner at SPI Asset Management.

For now, "the market is still really playing on a higher-for-longer U.S. interest rate narrative," he said.

U.S. non-farm payrolls data is due at 1230 GMT. Market expectations are for the data to show 300,000 jobs were added in August, which could signal persistent strength in the labour market, which would reinforce expectations that the Fed will opt for a 75-basis-point rate hike this month.

Data on Thursday showed the number of Americans filing new claims for unemployment benefits fell to a two-month low last week, while layoffs dropped in August.

While surveys showed U.S. manufacturing grew steadily last month, factory activity in China, the euro zone and Britain fell, fanning concerns over a slowdown.

"Although China is struggling with COVID-19, there is no safe-haven demand... Safe-haven demand is going dollar's way," said Jigar Trivedi, senior analyst currency and commodity analyst at Mumbai-based Reliance Securities.

"Decline is seen in investment demand also... Holdings at the SPDR Gold Trust was around 1,006 tonnes at the beginning of August and are now at 973 tonnes." [GOL/ETF]

Even though gold is seen as a hedge against inflation and economic uncertainties, higher interest rates increase the opportunity cost of holding the bullion.

Spot silver rose 0.5% to $17.94 per ounce, platinum gained 0.3% to $830.80 and palladium climbed 1.6% to $2,045.47. They were also headed for a third consecutive weekly fall.

 

(Reporting by Eileen Soreng in Bengaluru; Editing by Rashmi Aich, Uttaresh.V & Simon Cameron-Moore)