Gold heads for a weekly decline amid expectations of a US interest rate hike

Gold is on track to record a weekly loss on Friday, pressured by rising U.S. Treasury yields and growing expectations that the Federal Reserve (the U.S. central bank) will raise interest rates.

Spot gold rose 0.3% to $4,291.06 per ounce by 08:44 GMT. It has fallen more than 2% since the start of the week. U.S. gold futures advanced 0.7% to $4,426.60.

U.S. Treasury yields hovered near their highest levels in about two decades, increasing the opportunity cost of holding gold.

“Persistent inflationary pressures are fueling concerns about further rate hikes, and these pressures are likely to continue until a resolution is reached regarding issues related to the Strait of Hormuz and the Middle East as a whole,” said Nitish Shah, a commodities analyst at Weisdom Trei.

The Federal Reserve raised interest rates by a quarter percentage point last week, the first increase in three years, signaling the possibility of further hikes.

Although gold is typically viewed as a hedge during periods of high inflation, higher interest rates tend to dampen demand as investors shift toward income-generating assets.

Meanwhile, gold demand in India saw a slight recovery this week, as lower prices attracted buyers ahead of the religious and popular festival season.