Gold prices experienced a modest increase on Friday, bouncing back from the lowest point seen in over a year during the previous session. However, they remained poised for a weekly decline, as rising oil prices heightened inflation worries and bolstered expectations for prolonged elevated interest rates in the United States. Spot gold increased by 0.2% to $3,883.05 per ounce at 0032, following a decline of 3% on Thursday. Bullion has experienced a decline of 4.4% thus far this week. US gold futures for December delivery stabilised at $3,887.00.
US President Donald Trump stated on Thursday that the US does not require a deal with Iran, moderating expectations for a prompt resolution to the Middle East conflict. Oil prices surged on Thursday following an escalation in attacks on Saudi energy infrastructure, coupled with shipping disruptions in the Strait of Hormuz that posed a threat to global oil flows. Cleveland Federal Reserve President Beth Hammack stated on Thursday that she does not believe the US central bank needs to adopt a more aggressive stance on interest rate increases to address the persistently high and widening inflation. The Fed will likely need to raise rates further to address elevated inflation, San Francisco Fed President Mary Daly stated on Thursday, without indicating that there should be urgency in this action.
Markets are currently pricing in an 85% likelihood of a 25-basis-point rate increase in December, with a 14.5% probability assigned to a more substantial 50-basis-point adjustment, as indicated by CME’s FedWatch tool. Gold is often regarded as a safeguard against inflation; however, elevated interest rates heighten the opportunity cost associated with holding non-yielding bullion, thereby diminishing its attractiveness to investors. The number of Americans filing new claims for unemployment benefits increased more than anticipated last week, yet remained at a level indicative of a stable labour market, thereby enabling the Fed to concentrate on combating inflation.
Elsewhere, the European Central Bank is anticipated to implement a final deposit rate hike in this cycle next month, as indicated by the majority of economists surveyed by Reuters. However, over one-third foresee a further increase in early 2027, given that inflation is projected to reach double the 2% target. Among other metals, spot silver was up 0.1% at $50.07 per ounce, platinum gained 0.3% to $1,523.55 and palladium rose 0.3% to $996.84. However, all three metals were on track for weekly declines.
