PRECIOUS-Gold gains over 1%, but set for monthly decline
By Ashitha Shivaprasad
April 29 (Reuters) - Gold prices rallied 1% on Friday on the back of a retreat in the dollar, but the metal was set to end the month lower on bets of aggressive policy tightening by the U.S. Federal Reserve.
Spot gold XAU= was up 0.7% at $1,908.20 per ounce by 1607 GMT. However, it was on course its first monthly drop since January with a decline of 1.5% so far in April.
U.S. gold futures GCv1 gained 1.1% to $1,911.20 per ounce.
"Gold market has seen consistent sell-off in the past weeks as the dollar rallied. Currently, the dollar index has declined, which is lifting gold prices," said Edward Meir, an analyst with ED&F Man Capital Markets.
The dollar index =USD fell 0.4% after touching a 20-year high on Thursday, making gold less expensive for those holding other currencies. USD/
Further lifting bullion's appeal, data showed the U.S. economy unexpectedly contracted in the first quarter amid a resurgence in COVID-19 cases and drop in pandemic relief money from the government. nL2N2WP2ZV
U.S. labour costs surged by the most in 21 years in the first quarter, pointing to rising wage inflation and supporting the Federal Reserve's aggressive monetary policy stance. nL2N2WP2ZV
"The GDP data and the cost index for employment data showed that inflation still running fairly hot, this is generally supportive for gold," Meir said.
Gold is considered a hedge against soaring inflation and uncertainties, but rising interest rates dampen its appeal by increasing the opportunity cost of holding the non-interest bearing asset.
The markets focus now shifts to the U.S. central bank's two-day policy meeting starting on May 3, with officials expected to increase the target policy rate by half a percentage point. nL2N2WQ1VA
Spot silver XAG= fell 0.5% to $23.03 per ounce, while platinum XPT= advanced 1.7% to $935.65. Both metals were set to post a monthly fall.
Palladium XPD= rose 2.4% to $2,286.08 per ounce.
(Reporting by Ashitha Shivaprasad; Editing by Amy Caren Daniel and Aditya Soni)