Spot gold increased 0.9 percent to $4,169.32 an ounce on Friday, supported by a weaker US dollar and lower US Treasury yields as inflation worries and expectations for Federal Reserve interest-rate policy shaped investor moves.
Fed rate expectations influence gold
Data from CME FedWatch showed an 18 percent probability of an interest-rate increase in October and an 82 percent chance of a hike by December. Alberto Musalem, President of the St. Louis Fed, said interest rates may need to rise again to return inflation to the 2 percent target.
Despite ongoing inflation concerns, gold remains under pressure because it yields no interest, factors that complicate its outlook in a high interest-rate environment. US annual inflation was 3.4 percent in August, near a recent high.
Other precious Metals rise on lower dollar
US gold futures mirrored spot gains, rising 0.9 percent to $4,194.40 an ounce. Silver gained 1.1 percent to $60 an ounce while platinum and palladium increased 2.2 percent and 2.1 percent to $1,670.15 and $1,146.98 an ounce respectively, although all three were set to close the week with losses.
Tony Sage, Chief Executive Officer of Critical Metals, noted that oil price increases and Middle East supply risks have raised inflation concerns. He also said that ongoing central bank gold purchases could limit losses despite potential new interest-rate increases.
Market context and holdings
The US 10-year Treasury yield fell for the second consecutive session on Friday, contributing to the weaker dollar and supporting gold prices. Spot gold had reached a two-month low earlier in the week.
Speculative net long positions in gold shrank slightly to 218,632 contracts as of the week ending 29 September from 225,853 a week earlier, according to CFTC data.
Related: Gold rises as dollar eases from 18-month high on Fed policy outlook
Data: FRED — St. Louis Fed · CFTC
