Gold prices edged up on Friday, recovering from the previous session’s lowest level in more than a year. The metal was still on course for a weekly fall, however, as higher oil prices fed inflation worries and reinforced expectations that US interest rates will stay high for longer.
Spot gold rose 0.2% to $3,883.05 per ounce by 0032 GMT, after dropping 3% on Thursday. Bullion has fallen 4.4% so far this week. US gold futures for December delivery steadied at $3,887.00.
Oil and Middle East tensions
Oil prices jumped on Thursday after attacks on Saudi energy infrastructure escalated. Shipping disruptions through the Strait of Hormuz also threatened global oil flows, adding to concerns about rising costs.
US President Donald Trump said on Thursday that the United States does not need a deal with Iran. His comments tempered hopes for a quick resolution to the Middle East conflict.
Rate outlook
Gold is typically seen as a hedge against inflation. But higher interest rates raise the opportunity cost of holding bullion, which pays no yield, making it less appealing to investors.
Cleveland Federal Reserve President Beth Hammack said on Thursday she does not believe the US central bank needs to shift to more aggressive rate rises to tackle inflation that remains high and is spreading. San Francisco Fed President Mary Daly, also speaking on Thursday, said the Fed will likely need to raise rates further to deal with elevated inflation. She did not suggest the central bank should be in a hurry.
Markets are pricing in an 85% chance of a 25-basis-point rate hike in December, according to CME’s FedWatch tool. The probability of a larger 50-basis-point move stands at 14.5%.
Meanwhile, the number of Americans filing new claims for unemployment benefits rose more than expected last week. The level remained consistent with a stable labour market, which gives the Fed room to focus on fighting inflation.
Europe
The European Central Bank will deliver its final deposit rate hike in this cycle next month, according to most economists polled by Reuters. More than a third, however, expect another increase in early 2027, as inflation runs at double the bank’s 2% target.
Other metals
Spot silver was up 0.1% at $50.07 per ounce. Platinum gained 0.3% to $1,523.55, while palladium rose 0.3% to $996.84. All three metals, though, were headed for weekly declines.