Gold books first weekly gain in over a month as U.S. dollar pulls back

Gold futures settled sharply higher on Friday to book their first weekly gain in five weeks and their biggest weekly advance since mid-January, as the U.S. dollar pulled back after recent gains.

Price action

Gold for April delivery
GC00,
+0.29%
GCJ23,
+0.29%
rose $14.10, or 0.8%, to settle at $1,854.60 an ounce on Comex, with the most-active contract up nearly 2.1% for the week. That was the largest weekly gain for the yellow metal since mid-January, according to Dow Jones Market Data.
May silver
SIK23,
+0.51%
was up 34 cents, or 1.6%, to end at $21.24 an ounce, jumping nearly 2.1% for the week.
April platinum
PLJ23,
+0.10%
gained $16.20, or 1.7%, to finish at $979.40 an ounce, up 7.9% for the week. June palladium
PAM23,
+0.42%
rose $4.10, or 0.3%, to end at $1,449 an ounce, leaving it up 5.2% on the week.
May copper
HGK23,
-0.58%
dropped 1 cent, or 0.2%, to settle at $4.07 per pound, rising 2.9% for the week.

Market drivers

Analysts said the U.S. dollar continues to call the tune for gold, with the ICE U.S. Dollar Index
DXY,
-0.64%,
a measure of the currency against a basket of six major rivals, down 0.4%, at 104.59 on Friday. The index is down 0.4% for the week, trimming its year-to-date advance to 1.2%, according to FactSet.

The dollar’s bounce in February had weighed on gold. A stronger dollar can be a weight on commodities priced in the unit, making them more expensive to users of other currencies.

The dollar has been the “primary driver” of price action in gold as investors assess the Federal Reserve’s rate path, wrote analyst Gary Wagner at Kitco. The dollar rallied in February, pushing down gold, as a run of hot U.S. labor and inflation data saw traders price in expectations for more aggressive Federal Reserve interest rate increases and largely price out previous expectations for rate cuts by year-end.

Gold may have also found some recent support on fears an aggressive Fed could push the U.S. economy into recession, but a continued rise in U.S. Treasury yields, along with a relatively resilient dollar means upside may be limited, said Christopher Louney, analyst at RBC Capital Markets, in a note.

“While off its 2022 highs, the dollar remains quite strong, but more importantly, rates have continued to rise and are closing in on their 2022 highs with 10-year U.S. Treasuries
TMUBMUSD10Y,
3.705%
north of 4%,” he wrote.

Rising Treasury yields raise the opportunity cost of holding nonyielding assets, like commodities.

However, gold could have a “make-or-break moment” next week as Federal Reserve Chair Powell will testify on the central bank’s semiannual monetary policy report to the House Financial Services Committee on Wednesday at 10 a.m. Eastern. Investors also expect the U.S. February employment report on Friday.

“If Fed Chair Powell sticks to the hawkish script and we don’t see a major downward revision to January and a strong job gain in February, gold could see this week’s rally evaporate,” wrote Edward Moya, senior market analyst at OANDA. “If Powell provides optimism that the peak is close to getting put in place, gold could skyrocket.”

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