Gold climbed to $4,385.76 an ounce on Friday as falling oil prices eased fears that energy costs would drive further interest-rate hikes. The metal is on pace for a roughly 0.9% weekly gain after recovering from a six-week low earlier in the week, even as the Bank of Japan joined the Federal Reserve and European Central Bank in raising rates.
Spot gold climbed 1.0% to $4,385.76 an ounce at 04:42 ET on Friday. Gold futures gained 0.6% to $4,425.20 an ounce over the same stretch. Falling oil prices eased investor concern that energy costs would drive further interest-rate increases.
The metal is up about 0.9% over the past week. It recovered more than 2% on Thursday after touching a near six-week low on Wednesday.
Oil Slide Eases Inflation Pressure
Oil prices fell for a third straight day as the outlook for supply disruptions in the Middle East improved. Saudi Arabia reportedly expects to restore flows through a key pipeline within days, while China has stepped up diplomatic efforts to rein in Iran-backed Houthi militants, who have gained more leverage over the Bab el-Mandeb Strait.
The easing energy pressure has offered relief to investors worried that energy-driven inflation would fuel a monetary-tightening cycle around the world. Higher interest rates can weigh on non-yielding assets like gold.
Bank of Japan Joins Rate-Hike Wave
Mirroring recent moves by the Federal Reserve and the European Central Bank, the Bank of Japan raised interest rates on Friday, noting concern that inflation was coming increasingly close to crossing its 2% annual target. Whether policymakers will roll out more rate increases in the coming months remains a key source of debate for investors.
Dollar Strength Clouds the Outlook
Moderating oil prices have "taken the edge off" strength in the U.S. dollar following the Fed's first rate hike in three years on Wednesday, according to analysts at ING. The analysts also flagged upside risks to the dollar, saying a hawkish Fed message opened the door for markets to fully price in another rate hike in October if data and energy prices warrant it.
A firmer dollar can dent gold by making it more expensive for overseas buyers. The U.S. dollar index, which tracks the currency against a basket of peers, was last higher by 0.1% at 100.38.
Gold ETF Inflows Keep Climbing
Gold-backed exchange-traded funds tracked by Bloomberg have reportedly recorded billions of dollars in inflows. Analysts at ANZ said holdings in those funds have increased for eight consecutive sessions. The ANZ analysts pointed to strong demand for options on some of the largest gold-backed ETFs, suggesting traders remain active despite expectations for tighter monetary policy.
Source: Commodities & Futures News
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