Gold Rises as Lower Oil Prices Ease Inflation Concerns

Gold edged up to a one-week high of $4,350 on Friday, posting its first weekly gain in four weeks, as falling oil prices eased concerns over prolonged inflationary pressures. Gains were capped, however, by a stronger dollar, which remained supported after the US Federal Reserve raised rates by 25 bps on Wednesday and signaled further hikes in the coming months. Markets now price in a nearly 60% chance of another rate increase next month. The Bank of Japan also raised rates to a 31-year high, while signaling that further increases remain on the table. Meanwhile, Brent crude fell for a third consecutive session as easing concerns over Saudi supply disruptions outweighed fears of a broader escalation in the Middle East.

Gold rose toward $4,400 an ounce on Frida, extending gains from the previous session, supported by falling oil prices that eased inflation concerns and helped push bond yields lower. Oil prices declined for a third consecutive session as Saudi Arabia worked to restore flows through its East-West pipeline, while President Donald Trump is set to meet with Gulf leaders next week. Treasury yields also pulled back from multi-year highs, with the US 10-year yield falling to around 4.93% after briefly exceeding 5% earlier this week. Meanwhile, investors continued to assess the outlook for Federal Reserve monetary policy following its first rate hike in three years. The US central bank signaled that additional tightening could be needed to contain inflationary pressures, with markets now pricing in roughly a 53% probability of a move in October.

Gold climbed 2% to around $4,360 an ounce on Thursday, recovering from a near six-week low touched on Wednesday, as investors reassessed their positions following the US Federal Reserve’s first rate hike in three years. The dollar retreated from a seven-week high reached after US policymakers raised rates and signaled further hikes in the coming months, with Chief Kevin Warsh joining the unanimous decision and underscoring policymakers’ concerns that inflation remains elevated. While gold is traditionally viewed as a hedge against inflation, higher interest rates tend to reduce its appeal by increasing the attractiveness of interest-bearing assets. Elsewhere, the Bank of England kept interest rates unchanged on Thursday, while the Bank of Japan is widely expected to raise rates to a 31-year high on Friday. Meanwhile, oil prices extended their decline as concerns over supply disruptions eased, while US President Trump said he hoped an end to the war with Iran was near.