Gold inched higher on Friday as lower oil prices and a subdued U.S. dollar offered support, while market participants kept their focus on developments in the Middle East and the outlook for global monetary policy.
Chalinee Thirasupa | Bloomberg | Getty Images
Gold prices rose to a one-week high on Friday, and were on track for their first weekly gain in four, as lower oil prices eased concerns about prolonged inflationary pressures, though a stronger dollar limited gains.
Spot gold was up 0.3% at $4,352.39 an ounce, after hitting its highest level since September 11 earlier in the session. Bullion has gained 0.2% so far this week.
US gold futures edged 0.2% lower to $4,390.30.
“Easing of oil prices reduces inflation pressures as oil has been the main driver of overall inflation … Precious metal investors had expected a (U.S.) rate hike and piled into short positions to take advantage of the expected selloff in gold. These positions have been rapidly unwound,” said Chris Gaffney, president of world markets at EverBank.
Brent crude oil prices extended losses for a third straight session as easing concerns over Saudi supply disruptions outweighed anxiety about a widening of conflict across the Middle East.
Lower oil prices offered some relief from inflation worries, but the risk of a Middle East supply shock remains a key concern.
The dollar rose to a more than seven-week high, making greenback-priced bullion expensive for holders of other currencies.
The Federal Reserve raised interest rates by a quarter of a percentage point to the 3.75%-4% range on Wednesday and flagged more hikes in coming months.
Traders now see a 58% chance of another US rate hike when the central bankers meet next in October, according to the CME FedWatch tool.
Although gold is traditionally viewed as an inflation hedge, higher interest rates can diminish its appeal by making yield-bearing assets more attractive.
Additionally, the Bank of Japan raised interest rates to a 31-year high and signaled its readiness to keep pushing up borrowing costs.
Meanwhile, gold demand in India was subdued this week as buyers held back purchases in anticipation of lower prices, while premiums in China remained steady, supported by robust investment demand.
“Gold is currently testing resistance near the $4,400 to $4,440 range and a move above this resistance level could clear a path higher for gold prices,” said Gaffney.
Spot silver rose 1.8% to $66.37, platinum gained 1.7% to $1,798.30 and palladium added 1% at $1,303.46. All metals were headed for weekly gains.
