Gold prices climbed higher on Friday as the dollar drifted lower, extending recent losses, with traders shifting their focus to the Federal Reserve’s meeting next week.
The Fed is expected to hike rates by a smaller 25 basis points rather than a 50-basis point rate hike expected earlier.
The dollar index dropped to 103.84, losing more than 0.5%.
Gold futures for April ended higher by $50.50 at $1,973.50 an ounce.
Silver futures for May ended up $0.770 at $22.462 an ounce, while Copper futures for May settled at $3.8925 per pound, gaining $0.0280.
“The return of bank angst is sending gold prices sharply higher. Many gold investors are looking at the short-term macro risks and it seems that a wide range of expectations should mostly be positive for bullion,” says Edward Moya, Senior Market Analyst at OANDA.
“If the Fed is one and done with rate hikes, that should be bullish for gold as it puts a short-term cap on the dollar. If inflation proves to be stickier and the Fed has to resume tightening that would deliver a major blow to the economy and trigger many safe-haven flows for gold,” he adds.
In economic news, the Federal Reserve released a report showing U.S. industrial production was unexpectedly unchanged in the month of February.
The Fed said industrial production was unchanged in February following a revised 0.3% increase in January. Economists had expected industrial production to rise by 0.2% compared to the unchanged reading originally reported for the previous month.
A separate report from the University of Michigan showed consumer sentiment in the U.S. fell for the first time in four months in March.
The report said the consumer sentiment index slid to 63.4 in March from 67.0 in February. Economists had expected the index to be unchanged.
Surveys of Consumers Director Joanne Hsu noted the decrease was already fully realized prior to the failure of Silicon Valley Bank.
Meanwhile, the report showed decreases in both near-term and long-term inflation expectations, with year-ahead inflation expectations falling to the lowest level since April 2021.