Gold prices hovered near a one-week low as stronger US rate expectations pressured bullion, although easing oil prices later helped the precious metal recover.
LONDON: Gold prices hovered near their lowest level in more than a week on Friday as investors weighed the prospect of higher US interest rates and awaited crucial inflation data that could influence the Federal Reserve’s next policy decision.
Spot gold was little changed at around $4,318.88 an ounce early on September 11, after touching its lowest level since September 2. Bullion had fallen nearly 2 per cent on Thursday following US producer-price data.
Why are gold prices under pressure?
Gold prices have come under pressure as markets increasingly consider the possibility that the US Federal Reserve could raise borrowing costs.
Higher interest rates generally make non-yielding assets such as gold less attractive compared with investments that generate interest.
Expectations shifted after stronger economic indicators and inflation concerns increased uncertainty over the direction of US monetary policy.
Also read: Global food prices hit highest level since 2022 as supply fears grow
US inflation data becomes the next big trigger
Investors are now focused on US consumer price inflation figures due later on Friday.
The data could prove particularly important because markets are assessing whether inflation remains strong enough to justify another increase in US interest rates.
Traders raised the probability of a Federal Reserve rate increase at its upcoming meeting to about 67 per cent, according to CME FedWatch data cited by Reuters.
Also read: Nvidia AI server prices may rise 15% as memory gets expensive
Gold recovers as oil prices retreat
Gold later recovered some ground as oil prices declined.
Spot bullion was up around 0.6 per cent at $4,339.46 an ounce in later trading, although it remained on course for a weekly decline of nearly 3 per cent.
The retreat in oil followed signs of possible diplomatic progress concerning shipments through the Strait of Hormuz. Lower energy prices can ease inflation concerns, potentially reducing pressure on central banks to keep interest rates elevated.
Silver and other precious metals also move
Other precious metals also gained during Friday trading.
Silver rose 0.4 per cent to around $63.80 an ounce, platinum advanced 0.9 per cent to $1,792.07, while palladium climbed 2.4 per cent to $1,312.90. Despite the daily gains, all three remained on course for weekly losses.
What should gold investors watch next?
The immediate direction for bullion could depend heavily on US inflation figures and how they change expectations for the Federal Reserve.
Gold prices could remain volatile if investors continue switching between concerns over inflation, higher interest rates and geopolitical uncertainty.
Impact to expect
Gold could see sharper short-term swings as investors react to US inflation data and changing interest-rate expectations, with Federal Reserve policy likely to remain a major influence on precious-metal prices.
