Gold falls on dollar strength as investors focus on Fed meeting

Gold prices were down slightly on Friday, weighed down by a stronger dollar, as investors watched next week’s Federal Reserve policy meeting for more clues on reduced stimulus as inflation expectations soar.

At 1042 GMT, spot gold was down 0.2% at $ 1,795.71 an ounce, but was still on track to close the week 2.2% higher. Gold futures in the United States were down 0.3% at $ 1,797.10.

“On the one hand, gold should benefit from high inflation expectations, but it is being constrained by the prospects for interest rate hikes in the near or more distant future.”Said Daniel Briesemann, an analyst at Commerzbank.

European Central Bank President Christine Lagarde acknowledged on Thursday that inflation will be elevated for longer, but fought market bets that price pressures will drive interest rates higher next year.

“There is a disparity between market expectations and those of the European Central Bank on rate hikes“And that’s putting pressure on gold as well, Briesemann added.

The Fed is expected to announce when it will begin its reduction in stimulus after the November 2-3 meeting. Reduced stimulus and rate hikes often boost bond and dollar yields, reducing bullion’s attractiveness.

The dollar index was up 0.2%, but was heading for its third consecutive week in decline.

In other precious metals, spot silver was down 0.4% at US $ 24.01 an ounce; platinum was up 0.2% at $ 1,021.30 and palladium was up 0.2% at $ 1,992.49.