Gold heads for second weekly loss on strong US economic indicators

Gold prices edged higher on Friday, but were on track for their second consecutive weekly fall as data indicating strong growth in the U.S. economy kept the dollar firm, while focus shifted to a key inflation print due later in the day.

FUNDAMENTALS

* Spot gold was up 0.1% at $2,021.79 per ounce by 0155 GMT. The contract has lost 0.4% so far this week.

* U.S. gold futures rose 0.2% to $2,021.70.

* The U.S. economy grew faster than expected in the fourth quarter as inflationary pressures subsided amid strong consumer spending.

* Bullion slightly trimmed its losses for the week on Thursday after the U.S. GDP data highlighted that pace of inflation slowed and bond yields dropped.

* A private survey earlier this week showed the U.S. economy kicked off 2024 on a strong note, with business activity picking up in January and inflationary pressures appearing to abate.
* The dollar index rose 0.2% for the week, hovering near a six-week high, making bullion less attractive to other currency holders.
* The European Central Bank kept interest rates unchanged at a record-high 4% and ECB President Christine Lagarde said it was “premature to discuss rate cuts” but noted that risks to economic growth are “tilted to the downside.”

* Markets widely expect the U.S. Fed to stand pat on rates at its policy meeting on Jan. 30-31, but attention will largely be on comments from Chair Jerome Powell.

* Traders are betting on a 93% chance for a rate cut by May, according to LSEG’s interest rate probability app IRPR.

* Focus now shifts to the Fed’s favourite inflation gauge – the personal consumption expenditure (PCE) data – due at 1330 GMT.

* Lower interest rates decrease the opportunity cost of holding bullion.

* Spot silver fell 0.2% to $22.87 per ounce, platinum dipped 0.1% $890.76, and palladium edged 0.1% lower to $939.64. DATA/EVENTS (GMT) 0500 Japan Leading Indicator Revised Nov 0700 Germany Bfk Consumer Sentiment Feb 0745 France Consumer Confidence Jan 1330 US PCE data Dec 1400 US Dallas Fed PCE Dec 1500 US Pending Home Index Dec

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