Gold rises, but U.S. rate hike bets set up monthly drop

© Reuters. FILE PHOTO: An ingot of 99.99 percent pure gold is cast at the Krastsvetmet non-ferrous metals plant in the Siberian city of Krasnoyarsk, Russia March 10, 2022. REUTERS/Alexander Manzyuk

By Bharat Gautam

(Reuters) - Gold rose on Friday as worrying U.S. economic data rekindled some interest in the safe-haven metal, but bullion was likely to log its first monthly drop since January on bets for aggressive interest rate hikes by the Federal Reserve.

Spot gold was up 0.6% at $1,905.67 per ounce, as of 0546 GMT, but had lost about 1.6% so far this month. U.S. gold futures were up 0.9% at $1,908.10.

The disappointing U.S. GDP number could take some pressure off the Fed to tighten quite as aggressively as it has hinted, a rhetoric that has pressured gold in recent weeks, said Ilya Spivak, a currency strategist at DailyFX.

"That has given gold a bit of a lifeline, and knocked the dollar back just a bit. I don't expect these moves to continue though," Spivak added.

Fed officials have aligned around plans to accelerate the pace of interest rate hikes this year, but remain split over what could be the make-or-break decision of where to stop to avoid dragging the economy into recession.

Higher short-term U.S. interest rates and bond yields increase the opportunity cost of holding zero-yield bullion.

Gold prices were headed for their first monthly percentage drop since January, with the dollar and U.S. 10-year Treasury yields strengthening this month.

A stronger dollar makes greenback-priced gold less attractive for other currency holders. The dollar edged off a 20-year high it reached against rivals in the previous session. [USD/]

"The freight train, otherwise known as the U.S. dollar, will have to slow down at some point. And that could bode well for gold when it does," trading firm City Index's senior market analyst Matt Simpson said in a note.

Spot silver gained 0.9% to $23.34 per ounce, platinum advanced 0.6% to $924.49, and palladium rose 0.7% to $2,247.63. All were set for monthly falls.