Gold prices edged higher on Friday but were headed for a third consecutive weekly fall as expectations of a U.S. rate hike strengthened, while traders awaited U.S. consumer price index data for further clues on the Federal Reserve’s policy path.
Edgar Su | Reuters
Gold prices firmed more than 1% on Friday, rebounding from recent losses and finding a short-term floor despite strong U.S. inflation data lifting expectations of a Federal Reserve rate hike next week.
Spot gold rose 1.6% to $4,385.14 an ounce, but was down about 1% for the week so far.
“Gold is recovering rapidly after a brief dip, as CPI data may be cementing expectations of a Fed rate hike next week. The volatility is somewhat muted, as market had a hike 70% priced in,” said Tai Wong, an independent metals trader. “Price action here suggests that gold is finding a short-term base after the recent retreat.”
U.S. gold futures gained 0.5% to $4,426.90.
Prices fell nearly 2% on Thursday after the U.S. Producer Price Index data showed prices increased in line with expectations in August amid a rebound in the cost of energy products.
The Consumer Price Index increased 0.4% last month after edging up 0.1% in July, the Labor Department’s Bureau of Labor Statistics said on Friday. In the 12 months through August, consumer inflation advanced 3.4% after rising by the same margin in July.
Oil prices fell on Friday, but remained on course for a weekly gain.
Higher oil prices stoke inflation fears and bolster expectations of the Fed raising interest rates. While gold is typically seen as an inflation hedge, higher interest rates diminish the appeal of non-yielding bullion.
Meanwhile, traders are now pricing in a 85% chance of a rate hike at the central bank’s policy meeting next week, up from 67% before the data, according to the CME FedWatch Tool.
Elsewhere, gold demand in India was subdued this week as volatile prices discouraged buyers, while investment demand remained strong in top consumer China.
Among other metals, spot silver rose 2.1% to $64.86 per ounce, but was down 2% for the week.
Platinum climbed 1.5% to $1,803.94 and palladium gained 2.9% to $1,318.91. However, both metals were on track for a weekly loss.
