Gold prices dip with Fed rate trajectory in focus

Gold prices slipped on Friday (21 April) as the dollar firmed, while soft US economic data reinforced expectations that the US Federal Reserve would pause its tightening cycle after delivering one more rate hike next month.

Spot gold XAU= was down 0.4% at $1,996.92 per ounce, as of 0612 GMT, after rising 1% on Thursday. Bullion has lost about 0.3% so far this week.

US gold futures GCv1 shed 0.7% to $2,005.70.

Gold prices have been moderating in the absence of real incoming news flow and "we really need to see some bigger pieces of information to give it that directional conviction", said Ilya Spivak, head of global macro at Tastylive.

Data on Thursday showed more Americans filing claims for unemployment benefits. Separate data showed factory activity in the mid-Atlantic region plunging to a nearly three-year low in April.

Cleveland Fed President Loretta Mester on Thursday said the Fed still has more rate increases ahead of it, but noted the aggressive move to boost the borrowing cost over the last year to quash high inflation is nearing its end.

Rate hikes raise the opportunity cost of holding non-interest-bearing gold.

The Purchasing Managers' Index data due later in the day will be "an interesting window into what's going on, then another big break until we see the US GDP and PCE numbers next week," Spivak said.

The CME FedWatch tool shows markets are pricing in an 81.2% chance of a 25 basis points hike in May, which set the dollar for its first weekly gain in over a month and made bullion less affordable for overseas buyers.

Gold may end its bounce below a resistance at $2,018, according to Reuters technical analyst Wang Tao.

Spot silver XAG= dropped 0.5% to $25.17 per ounce, and was headed for its first weekly decline in six.

Platinum XPT= fell 0.2% to $1,090.91, while palladium XPD= rose 0.3% to $1,590.65. Both metals were on course to gain this week.