Investing.com - Gold prices inched up modestly on Friday, but gains were limited as traders reassessed their expectations for the timing of the next U.S. rate hike following the release of better than expected U.S. retail sales and consumer sentiment data.
Retail sales rose 1.3% in April, the Commerce Department said, posting its largest gain in a year, as Americans stepped up purchases of automobiles and a range of other goods. Economists expected sales to increase 0.8%.
Meanwhile, the preliminary reading for consumer sentiment in May jumped to an 11-month high of 95.8, well above the expected reading of 90.0, driven by steadily rising incomes, better employment prospects and low inflation.
The upbeat data suggested the economy was regaining momentum after growth almost stalled in the first quarter, bolstering the view that the Federal Reserve is still on track to raise rates before the end of the year.
The Atlanta Fed raised its fourth-quarter GDP growth estimate to a 2.8% annualized rate from 2.2% as a result of last month's strong retail sales increase.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, jumped to 94.84, the most since April 25. It ended the week at 94.60, up 0.5% for the day.
Gold for June delivery on the Comex division of the New York Mercantile Exchange inched up $1.50, or 0.12%, to close the week at $1,272.70 a troy ounce.
Despite Friday’s modest gains, gold prices lost $21.30, or 1.64%, on the week, halting two consecutive weeks of gains, pressured by overall strength in the U.S. dollar.
A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
Prices of the yellow metal are still up nearly 19% so far this year amid indications the Federal Reserve will take a slow and cautious approach to raising interest rates this year.
Gold is sensitive to moves in U.S. rates, as a rise would lift the opportunity cost of holding non-yielding assets such as bullion. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
In the week ahead, market players will be turning their attention to Wednesday’s minutes of the Federal Reserve’s March policy meeting for fresh clues on the timing of the next U.S. rate hike.
U.S. inflation data will also be in focus, as investors attempt to gauge if the world's largest economy is strong enough to withstand further rate hikes in 2016.
Elsewhere in metals trading, silver futures for July delivery tacked on 2.9 cents, or 0.17%, on Friday to settle at $17.13 a troy ounce. On the week, silver futures dipped 32.8 cents, or 2.25%, the second straight weekly decline.
Also on the Comex, copper for July delivery shed 0.5 cents, or 0.02%, on Friday to end at $2.074 a pound, recovering slightly after falling to $2.059 on Thursday, a level not seen since February 18.
For the week, New York-traded copper prices plunged 7.2 cents, or 3.53% the second consecutive weekly loss, on worries over China's economy.
Data released over the weekend added to concerns over the health of the world’s second largest economy.
Industrial production rose at an annualized rate of 6.0% in April, below expectations for a 6.5% increase and slowing from a gain of 6.8% in the preceding month, the General Administration of Customs said on Saturday.
Fixed asset investment, which tracks construction activity, rose 10.5% last month, below forecasts for an increase of 10.9%.
The soft data followed disappointing Chinese trade and inflation figures earlier in the week, adding to doubts about whether the world's second-largest economy is stabilizing.
The Asian nation is the world’s largest copper consumer, accounting for nearly 45% of world consumption.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, May 16
The U.S. is to release data on manufacturing activity in the New York region.
Tuesday, May 17
The Reserve Bank of Australia is to publish the minutes of its latest monetary policy meeting, giving investors insight into how officials view the economy and their policy options.
The U.K. is to produce a report on consumer inflation.
The U.S. is to release a flurry of data, including figures on consumer prices, building permits, housing starts and industrial production.
Wednesday, May 18
Japan is to produce preliminary data on first quarter economic growth.
The U.K. is to publish its monthly employment report.
The euro area is to release revised data on consumer inflation.
The Federal Reserve is to publish the minutes of its April meeting.
Thursday, May 19
The U.K. is to release data on retail sales.
The European Central Bank is to publish the minutes of its April meeting.
The U.S. is to report on initial jobless claims and manufacturing activity in the Philadelphia region.
Friday, May 20
Tokyo is to host the G7 meeting.
The U.S. is to round up the week with industry data on existing home sales.