Gold prices slips after six-session rally as dollar firms

Gold prices fell on Friday, breaking a six-session rally as a firmer dollar took some shine off the metal, but concerns over persistent inflation kept bullion on track for a second week of gains.

Spot gold dropped 0.6% to $1,851.31 per ounce by 0928 GMT, after hitting a five-month peak on Wednesday. U.S. gold futures were down 0.6% at $1,852.80.

The dollar rose to its highest since July 2020, making gold more expensive for buyers holding other currencies.

The greenback has further scope for gains with major central banks lagging in terms of rate hikes, and in this scenario gold may suffer due to the inverted correlation, said Ricardo Evangelista, senior analyst at ActivTrades.

But the metal is still on track for a weekly gain, after U.S. consumer prices recorded their sharpest jump in over 30 years last month and drove demand for bullion, seen as an inflation hedge.

"Gold has lifted its reputation as a store of value in particular after high inflation readings from the United States, and this will give further support," Commerzbank analyst Daniel Briesemann said.

A sharp rise in inflation has also fanned fears the Federal Reserve could hike interest rates sooner than expected.

Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of gold, which pays no interest.

"(But) the fact the Fed will tighten its monetary policy starting this month is not having such a strong effect on gold prices, as inflation (expectations) have gained the upper hand," Briesemann added.

The Fed has said it will begin to reduce its pandemic-era asset purchase program this month.

Elsewhere, spot silver fell 1.3% to $24.89 per ounce, platinum dropped 1.8% to $1,065.85, and palladium slipped 1.5% to $2,027.97.