Gold heads for third consecutive weekly decline on rate hike bets, palladium sheds 8%

Gold rose on a weaker dollar on Friday but prospects of aggressive rate hikes from the U.S. Federal Reserve put bullion on course for a third consecutive weekly decline, while palladium fell over 8% on demand concerns.

Palladium fell 6.6% to $2,042.14 by 1:08 p.m. ET (1708 GMT), after hitting its lowest since Jan. 2022 at $2,002, en route to an about 11.9% dip for the week.

"There`s concerns China`s outlook is deteriorating even further and that you might see less demand for some of those metals over the short term and that`s kind of driving the move lower for palladium," said Edward Moya, a senior analyst with OANDA.

Used in vehicle exhausts to curb emissions, the metal retreated nearly 10.9% in the second quarter, since hitting an all-time high in early March at $3,440.76 on concerns the war in Ukraine could cut supply from key producer Russia.

Spot gold rose 0.6% to $1,887.39 per ounce, but was down 0.5% for the week. U.S. gold futures rose 0.7% to $1,888.80.

The dollar index slipped 0.3%, making gold less expensive for overseas buyers.

But capping bullion`s upside, benchmark U.S. Treasury yield strengthened, with stronger-than-expected U.S. jobs data perceived as building the case for bigger interest rate hikes.

"Gold traders basically saw the non-farm payroll report as another confirmation the Fed is going to remain on cruise control with delivering point rate increases over these next couple of policy meetings," Moya added.

The bond market sell-off would also continue to weigh on gold, Moya added.

While gold is perceived as an inflation hedge, higher U.S. interest rates lift the opportunity cost of holding zero-yield bullion. Gold is considered a safe store of value during global uncertainties, such as the Ukraine war.

Elsewhere, silver was down 0.3% to $22.43 per ounce and platinum fell 1.4% to $966.72.