Gold prices edged higher on Friday, recovering from the previous session’s lowest level in more than a year, but stayed on track for a weekly fall as higher oil prices stoked inflation concerns and reinforced expectations for higher-for-longer US rates.
Spot gold rose 0.2% to $3,883.05 per ounce by 0032 GMT after dropping 3% on Thursday. Bullion has declined 4.4% so far this week.
US gold futures for December delivery steadied at $3,887.00.
US President Donald Trump said on Thursday the US does not need a deal with Iran, tempering hopes for a swift resolution to the Middle East conflict.
Oil prices jumped on Thursday after attacks on Saudi energy infrastructure escalated and shipping disruptions through the Strait of Hormuz threatened global oil flows.
Cleveland Federal Reserve President Beth Hammack said on Thursday she does not believe the US central bank needs to shift to more aggressive interest rate rises to combat still-high and broadening inflation.
The Fed will likely need to raise rates further to deal with elevated inflation, San Francisco Fed President Mary Daly said on Thursday, without suggesting it should be in a hurry about it.
Markets see an 85% chance of a 25-basis-point rate hike in December, while the probability of a larger 50-basis-point move is priced at 14.5%, according to CME’s FedWatch tool.
Although gold is typically seen as an inflation hedge, higher interest rates increase the opportunity cost of holding non-yielding bullion, reducing its appeal to investors.
The number of Americans filing new claims for unemployment benefits increased more than expected last week, but remained at a level consistent with a stable labour market, allowing the Fed to focus on fighting inflation.
Elsewhere, the European Central Bank will deliver a final deposit rate hike in this cycle next month, according to most economists polled by Reuters, although more than a third expect an additional increase in early 2027 as inflation hits 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 headed for weekly declines.
