Investing.com -- Gold inched down on Friday while hovering near a three-week low, as investors remained focused on the dollar's renewed upward push and hawkish indications from the Federal Reserve on an imminent interest rate hike before the end of the first half of the year.
On the Comex division of the New York Mercantile Exchange, gold for June delivery traded between $1,249.50 and $1,260.10 an ounce before settling at $1,251.35, down $3.55 or 0.28%% on the session. For the week, gold fell by approximately $20 an ounce, suffering one of its worst five-day stretches of an otherwise robust start to 2016. Despite the recent the downturn, the precious metal is up by more than 18% since January 1st and is on pace for one of its strongest first halves of a year in more than a decade.
Gold likely gained support at $1,247.50, the low from Thursday's session when it plunged more than 1.5% on the session. The yellow metal was also met with resistance at $1,276.40, the high from May 18.
Metal traders continued to closely monitor fluctuations in the dollar, as the greenback lingered near 7-week highs from the previous session. At the G-7 Summit in Sendai, Japan, a host of prominent finance ministers reiterated the importance of abstaining from currency manipulation, amid widespread concern that Japan could engage in possible actions to devalue the yen in an effort to bolster imports and provide a boost to equities on the Nikkei 225. While expressing discontent with recent moves by the Japanese government to intervene in global foreign exchange markets, Japan finance minister Taro Aso reaffirmed that it is committed to "avoiding competitive currency devaluation."
Last month, U.S. Treasury secretary Jack Lew sent explicit warnings to China, Germany and Japan to not take part in competitive currency devaluation, whether through Quantitative Easing or interest rate moves. At Friday's summit, Lew told reporters that top foreign officials made progress at February's G20 meeting in Shanghai due to a "re-commitment" by participants to refrain from such currency manipulations.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.10% to an intraday high of 95.46. Although the dollar is on pace for one of its strongest weeks since the start of March, the index is still down more than 4% since early-December.
Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Market players also continued to digest broad signals from the Federal Open Market Committee (FOMC) that it will raise short-term interest rates at a two-day meeting next month if the domestic economy shows improvement over the next few weeks. Earlier this week, several FOMC policymakers indicated that the committee could lift rates more than once before the end of the year, if global financial risk continues to recede and inflation firms. The FOMC has left its benchmark Federal Funds Rate at the current range between 0.25 and 0.50% at each of its three meetings this year.
Any rate hikes this year are viewed as bearish for gold, which struggles to compete with high-yield bearing assets in rising rate environments.
Silver for July delivery gained 0.027 or 0.16% to $16.520 an ounce.
Copper for July delivery fell 0.007 or 0.34% to $2.054 a pound.