Gold on track for worst week since Feb on hawkish Fed

Gold prices on Friday were heading for their biggest weekly percentage fall in over four months, weighed by a stronger dollar and hawkish comments by Federal Reserve officials.

Spot gold GOLD rose 0.3% to $1,919.99 per ounce as of 2:19 p.m. EDT (1819 GMT), after adding as much as 1.2% on a retreat in U.S. bond yields.

U.S. gold futures GOLD settled 0.3% higher at $1,929.6.

The dollar index DXY rose 0.5% to a one-week peak against its rivals, making gold less attractive for other currency holders.

The dollar strengthened after Fed Chair Jerome Powell, in congressional testimony this week, signaled more interest rate hikes ahead but vowed the central bank would proceed with caution.

"Powell was pretty hawkish. He favors more interest rate hikes and doesn't see any rate cuts anytime soon. That is pretty bearish on the metals," said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

San Francisco Fed Bank President Mary Daly said on Friday in an interview with Reuters that two more rate hikes this year is a "very reasonable" projection.

Higher U.S. interest rates increase the opportunity cost of holding gold.

Bullion has fallen nearly 2% so far this week and has lost more than $150 since scaling above the key $2,000 level in early May.

"Investor appetite lacks conviction in gold," Standard Chartered analyst Suki Cooper said in a note.

"The sharp drop in exposure since the last (Fed) meeting does not necessarily suggest imminent short-covering activity, but it does underscore a shift in sentiment as we head into a seasonally slower period for demand."

Spot silver XAGUSD1! rose 0.5% to $22.34 per ounce, but was set for its biggest weekly drop since October 2022. Platinum PL1! was down 0.6% at $917.34, on course for its worst week since August 2022.

Palladium XPDUSD1! steadied at $1,283.18 after hitting its lowest since May 2019 on Thursday.

Palladium could extend this year's near-30% price decline as demand is threatened by the rapid development and use of electric vehicles.