Gold ticks up, but still bound for weekly dip on hawkish Fed tilt

Gold steadied on Friday as the dollar eased, but was still bound for a weekly dip following indications from US Federal Reserve officials that more interest rate hikes were in the offing, reports Reuters.

Spot gold was little changed at $1,760.98 per ounce by 1157 GMT, set for a weekly decline of about 0.5 per cent. US gold futures fell 0.1 per cent to $1,762.20.

The gold market seems to be weighing up two different things at the moment, said Craig Erlam, senior market analyst at OANDA.

On one hand is US economic data suggesting lower inflation that gives room for the Fed to slow tightening, which should help gold, while on the other, a cautious Fed that doesn't want to shift the tone of their message based on any one piece of economic data, Erlam said.

While gold has shed 15 per cent since its March peak after the Fed began tightening monetary policy, it has gained about 8.0 per cent since the beginning of November as markets started pricing in a slower pace of rate hikes.

Markets currently see an 87 per cent chance of a 50-basis point hike at the Fed's December meeting.

Gold could, therefore, remain volatile until there's clear direction from the Fed, said Jigar Trivedi, an analyst with Mumbai-based Reliance Securities.

Although bullion is considered an inflation hedge, higher interest rates raise the opportunity cost of holding. Analysts said institutional investors are wary and further gains for gold could be elusive.