Gold prices climbed on Friday as a weaker U.S. dollar and softer expectations for Federal Reserve rate increases supported demand for the precious metal.
Gold Gains on Dollar Weakness
Spot gold rose 0.7% to $4,379.39 per ounce and was on track for a weekly gain of around 1%. Prices had fallen 1.3% in the previous session due to profit-taking after reaching their highest level since June 5.
U.S. gold futures also gained 0.4% to $4,437.30.
Jim Wyckoff, a market analyst at American Gold Exchange, said the weaker U.S. dollar index provided support for gold, making the dollar-priced metal more affordable for overseas buyers.
Fed Rate Expectations Support Gold
Gold benefited from expectations that the Federal Reserve will keep interest rates unchanged at its September meeting after U.S. inflation data came in largely in line with forecasts and July nonfarm payrolls unexpectedly declined.
Markets are now pricing in a 31% chance of a rate hike at the September meeting, down from around 55% the previous week, according to the CME FedWatch Tool.
Commerzbank said that if the Federal Reserve does not raise interest rates, gold prices could have further upside potential. Lower interest rates typically support non-yielding assets such as gold.
Middle East Tensions Add Market Uncertainty
Gold also received support from ongoing concerns surrounding the Strait of Hormuz, where transit appeared to slow significantly after additional ship attacks and statements from the United States regarding maintaining a naval blockade of Iran.
Oil prices were heading toward weekly gains following the developments. Jim Wyckoff noted that continued oil price increases could weigh on metals by contributing to inflation pressures and potentially encouraging central banks to raise interest rates.
