Gold edges higher on lower oil prices, subdued dollar

Gold inched higher on Friday as lower oil prices and a subdued US dollar offered support, while market participants kept their focus on developments in the Middle East and the outlook for global monetary policy.

Spot gold was up 0.2% at $4,346.65 per ounce, as of 0145 GMT.

US gold futures were down 0.3% at $4,385.70. Oil prices fell 1%, while the dollar remained subdued after retreating from recent highs.

A weaker dollar makes greenback-priced commodities less expensive for holders of other currencies.

The link between gold and oil could weaken if oil corrects sharply, easing inflation and rate-hike expectations, or if extreme escalation forces the world to counter recession, or if fiscal recklessness dominates the horizon over the rate channel, said Ahmad Assiri, research strategist at Pepperstone.

The Federal Reserve raised interest rates on Wednesday and flagged more hikes in the coming months.

Goldman Sachs kept its end-2027 gold price forecast at $5,400 despite the Fed rate increase, saying tighter policy is likely to slow bullion’s rally but not derail it.

Although gold is traditionally viewed as a hedge against inflation, higher rates can curb its demand by increasing the appeal of yield-bearing assets.

The Bank of England kept interest rates on hold on Thursday but warned they might have to go up.

The Bank of Japan is set to raise rates to a 31-year high on Friday and pledge to deliver more to counter inflation risks.

“This high-rates environment, in my view, caps near-term gold upside… However, if rising yields stem from deteriorating fiscal confidence, war-related spending and wider deficits, as opposed to rate expectations, a weaker dollar could accompany higher yields, possibly turning the relationship supportive for gold,” Assiri said.

Spot silver rose 0.7% to $65.61 and was headed for a weekly gain.

Platinum gained 1% to $1,785.80 and palladium added 0.2% at $1,294.41.