Gold Up, But Set for Worst Month in Seven Over Fed Concerns

© Reuters.

By Gina Lee

AiVIF.com – Gold was up on Friday morning in Asia, as worrying U.S. GDP data drove some investors towards the safe-haven asset. However, the yellow metal is set for its biggest monthly drop since September 2021 as the U.S. Federal Reserve is widely expected to aggressively hike interest rates when it hands down its policy decision in the following week.

Gold futures rose 0.87% to $1,907.70 by 1:16 AM ET (5:16 AM GMT) but have dropped about 2% in April 2022 to date.

A U.S. GDP that contracted 1.4% in the first quarter of 2022 could alleviate some of the pressure on the Fed to tighten quite as aggressively as it has hinted, a rhetoric that has pressured gold in recent weeks, DailyFX currency strategist Ilya Spivak told Reuters.

"That has given gold a bit of a lifeline and knocked the dollar back just a bit. I don't expect these moves to continue though," Spivak added.

Fed policymakers are aligned around plans to accelerate the pace of interest rate hikes in 2022. However, they are yet to reach a consensus on how fast the pace should be to avoid an economic recession.

However, gold was set for its biggest monthly percentage drop since September 2021, with the dollar and U.S. 10-year Treasury yields both strengthening in April to date. The dollar, which normally moves inversely to gold, was down on Friday but steadied off the 20-year high it reached against rival currencies during the previous session.

"The freight train, otherwise known as the U.S. dollar, will have to slow down at some point. And that could bode well for gold when it does," City Index senior market analyst Matt Simpson said in a note.

In other precious metals, silver inched up 0.1% and palladium rose 0.5%, while platinum fell 0.5%. All three metals were set for monthly falls.