Gold prices tick up as Fed comments clarify monetary policy path

NEW YORK (March 3) Gold prices saw a slight increase on Friday, and were poised to register their first weekly gain in five, as comments from Federal Reserve officials clarified the path of monetary policy.

Atlanta Fed President Raphael Bostic supported a 25 basis point hike in March, while Fed Governor Christopher Waller said that moderating inflation and economic growth could lead to rates peaking at an earlier forecast of 5.4%.

However, both officials warned that any signs of an overheated economy could invite more hawkish moves by the central bank. The metal markets took their comments in stride, extending earlier gains seen this week. Spot gold rose 0.2% to $1,838.42 an ounce, while gold futures rose 0.2% to $1,844.25 an ounce. Both instruments were set to add about 1.5% this week, their first positive week since mid-January.

In February, gold suffered significant losses following signs of stubborn U.S. inflation and a strong labor market. Treasury yields also rose overnight, while the dollar firmed as data showed U.S. jobless claims fell further in the past week. The focus on Friday is on a reading on U.S. service sector activity, with any signs of economic resilience giving the Fed more room to raise interest rates. Higher U.S. interest rates bode poorly for metal markets, as they drive up the opportunity cost of holding non-yielding assets.

Gold logged steep losses through 2022 as the Fed began aggressively raising interest rates. However, the prospect of an eventual pause in rate hikes helped metal markets recover from recent losses this week.

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