Gold Set for Biggest Weekly Drop Since November; Focus on US Inflation Data

Gold edged lower on Friday and was set to post its biggest weekly drop in over three months amid a stronger dollar, while investors awaited key U.S. inflation data for insights into the Federal Reserve's monetary policy trajectory.

Spot gold slipped 0.1% to $2,874.69 an ounce as of 0232 GMT, marking a 2% decline so far this week, the largest weekly drop since November 2024. The metal is on track for its first weekly decline after eight consecutive weekly gains. U.S. gold futures also eased 0.3% to $2,886.80.

The dollar index was set for a weekly gain of 0.7%, making gold more expensive for foreign buyers and exerting downward pressure on bullion prices.

"While gold is deemed a safe-haven asset, uncertainty on the trade front may still drive further profit-taking, especially amid a stronger U.S. dollar," said IG market strategist Yeap Jun Rong.

On the geopolitical front, U.S. President Donald Trump announced on Thursday that proposed 25% tariffs on Mexican and Canadian goods will take effect on March 4, along with an additional 10% duty on Chinese imports. He cited continued drug inflows into the U.S. from these countries as justification for the measures.

Meanwhile, Philadelphia Federal Reserve Bank President Patrick Harker signaled support for maintaining short-term borrowing costs within the current range of 4.25%-4.50%.

Gold is traditionally viewed as a hedge against political risks and inflation, but higher interest rates diminish its appeal as a non-yielding asset.

Investors now turn their attention to the Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation gauge, due at 1330 GMT.

"I do not think rate pricing will see any significant shift, as several components in the CPI and PPI suggest that PCE inflation could remain under control and may not significantly impact rate expectations," Yeap added.

Among other precious metals, spot silver rose 0.4% to $31.37 an ounce, platinum firmed 0.3% to $951.95, and palladium gained 0.1% to $920.34.