Gold bound for weekly dip on bets for higher-for-longer rates

Gold prices

Gold got a leg-up on Friday on slight weakness in the dollar and benchmark yields, but bullion was still bound for its third straight weekly dip as recent sound U.S. economic data raised bets for interest rates staying higher for longer.

Spot gold was up 0.2% to $1,892.59 per ounce at 10:38 a.m. ET (1438 GMT), down 1.1% for the week so far. U.S. gold futures rose 0.4% to $1,922.20.

The dollar was down 0.2%, making gold cheaper for holders of other currencies.

"Gold's got a problem where it's competing with instruments that are yielding 4-5%," such as bonds, while gold yields nothing in comparison, said Phillip Streible, chief market strategist at Blue Line Futures, in Chicago.

"It just does not seem like an ideal asset class in the current environment."

Benchmark 10-year U.S. Treasury yields headed lower from 10-month highs.

It would take multiple measures to boost optimism in gold, including weakness in U.S. equity markets and Fed Chair Jerome Powell signalling an end to the rate hike cycle, Streible added.

Traders expect the Fed to hold rates in the 5.25%-5.5% range until 2024, according to the CME's Fedwatch tool, while awaiting guidance from the Jackson Hole summit next week.

Premiums on physical gold in China jumped to the highest since December 2016 this week as economic worries spurred fresh safe-haven demand.

"We still expect disinflation and a lift in unemployment to bring about policy easing that will be gold supportive," said strategists at Macquarie, adding there was significant support around $1,840/oz.

Spot silver rose 0.1% to $22.71 per ounce.

The strength in investment by utilities, especially in solar energy, was supporting demand in silver.

Platinum gained 2.1% to $907.99 while palladium jumped 2.2 % to $1,243.86, though both were set for weekly declines.