Gold prices fell more than 1% on Friday after a jump in U.S. inflation bolstered expectations that the Federal Reserve would continue aggressive interest rate hikes, boosting the dollar and sending bond yields higher.
Spot gold was 1% down at $1,828.40 per ounce as of 9:40 a.m. EDT (1340 GMT), and was about 1.2% lower for the week. U.S. gold futures declined 1% to $1,834.40.
U.S. consumer prices accelerated in May as gasoline prices hit a record high and the cost of services rose further, suggesting that the Fed could continue with its 50 basis points rate hikes through September.
Gold prices hit their lowest since May 19 at $1,824.63 after the data, and then pared some of those losses in volatile trade.
"On one hand, we see a hotter-than-expected CPI number, which concerns the gold market since the Fed might need to be more aggressive in fighting those inflationary pressures," said David Meger, director of metals trading at High Ridge Futures. "The other side of that coin is clearly inflation remains sticky in the market, and gold being a quintessential hedge against those inflationary pressures, does continue to act supportive in that underlying inflationary environment."
The dollar rallied after the data , making gold more expensive for overseas buyers, while U.S. yields also advanced. High interest rates increase the opportunity cost of holding non-yielding bullion.
However, gold prices "have been remarkably resilient given (rate) hiking expectations, and a softening physical market with local prices in many regions swinging to a discount" amid concerns that inflation may outpace rate hikes, said Standard Chartered analyst Suki Cooper.
Physical gold discounts in India this week hit seven-week highs, while COVID-19 curbs dissuaded buyers in China.
Silver slipped 1.6% to $21.32 and platinum was down 1.5% at $956.33, while palladium shed 2.7% to $1,873.76. All of them were on course for weekly declines, with platinum set for its worst week since April 22.
(Reporting by Kavya Guduru and Arpan Varghese in Bengaluru; Editing by Emelia Sithole-Matarise)