NEW YORK: Gold rose to a one-week high on Friday, as falling oil prices eased concerns around inflation and pressure on US Treasuries, while traders assessed the likelihood of further US Federal Reserve interest rate hikes.
Spot gold rose 1.3 percent to USD4,186.04 by 09:39 a.m. EDT (1339 GMT), heading for a weekly gain of about 1 percent. The metal fell to a two-month low on Wednesday as a stronger dollar and rising US Treasury yields weighed on the non-yielding metal. US gold futures for December delivery also added 1.3 percent, trading at USD4,211.20 per ounce.
“Bullion is finding some breathing room today as oil benchmarks and longer-term Treasury yields ease away from recent highs,” said Han Tan, chief market analyst at Bybit.
Oil prices fell as worries over Middle East supply disruptions subsided after US President Donald Trump said the country would not attack Iran before the US midterm elections next month. US 10-year Treasury yields were off over two-decade highs hit on Wednesday. St. Louis Fed President Alberto Musalem said on Thursday the US central bank will need to hike rates again to bring inflation back to its 2 percent target.
Traders are pricing in a 19 percent chance of a rate hike in October and an 84 percent probability of at least one 25-basis-point increase by December, according to the CME’s FedWatch tool. Gold tends to lose its appeal compared to yield-bearing assets in a high interest-rate environment.
“It is arguable that a further Fed hike is already priced in but so is the expectation for continued official sector net purchases,” said Rhona O’Connell, head of market analysis at Stone X. “Without any Black Swan event I find it hard to see gold breaking convincingly higher.” Meanwhile, gold demand in India was sluggish this week as prices rebounded, while trading in top consumer China was subdued during the holiday-truncated trading period.
Among other metals, spot silver gained 2.4 percent to USD60.80 per ounce.
Platinum jumped 3.6 percent to USD1,692.85 and palladium climbed 2.5 percent to USD1,151.08, but both metals were headed for a weekly loss.
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