Gold prices fell on Friday, putting the metal on course for a weekly loss, after stronger-than-expected US employment data increased expectations of interest rate hikes by the Federal Reserve. The prospect of higher rates reduces the appeal of the non-yielding precious metal, which pays no interest and typically faces downward pressure when borrowing costs rise.

Silver and platinum also declined alongside gold. The three precious metals often move together in response to shifts in US monetary policy, with silver typically showing larger price swings than gold because of its smaller, more industrial-linked market. Investors are now looking ahead to upcoming inflation data, notably the Consumer Price Index, for further clues on the direction of US monetary policy, alongside the Federal Reserve's subsequent meetings where rate decisions are announced.

Gold is highly sensitive to shifts in US interest rate expectations. Because the metal generates no income, higher rates increase the opportunity cost of holding it, while rate cut expectations tend to support prices. The Federal Reserve's dual mandate covers maximum employment and price stability, so strong labor market readings and elevated inflation are key inputs into its policy decisions. Monthly nonfarm payrolls, released by the US Labor Department, are among the most closely watched indicators for this reason, as they signal whether the labor market is tight enough to keep upward pressure on wages and prices.

The US dollar and Treasury yields also influence bullion prices: a stronger dollar makes gold more expensive for holders of other currencies, while rising yields on bonds compete with gold as a store of value. At the same time, gold remains widely held as a traditional hedge against inflation and geopolitical uncertainty, which is why demand for the metal often rises during periods of economic or political stress even as rate expectations weigh on prices.

Source: Economic Times Markets