Gold prices inched higher on Friday, albeit trading below their recent two-week highs, as a larger-than-expected surge in U.S. consumer prices raised expectations that interest rates would remain elevated, subsequently lifting the U.S. dollar and bond yields from their recent lows.
Key Points:
Spot gold witnessed a 0.2% increase, reaching $1,872.20 per ounce at 0058 GMT, following its peak since September 27, at $1,884.79 on Thursday. Meanwhile, U.S. gold futures posted a 0.1% gain, closing at $1,884.70.
Gold has been on track to achieve a more than 2% increase this week, marking its most substantial weekly rise since mid-March. The surge in demand for safe-haven bullion has been attributed to military clashes between Israel and the Palestinian Islamist group Hamas.
As a traditional safe-haven investment during periods of economic uncertainty, gold has gained favor among investors. However, its appeal tends to diminish when interest rates rise, as it generates no interest.
U.S. Treasury yields climbed, and the U.S. dollar strengthened, while global stock markets observed declines after Thursday’s data revealed a September increase in U.S. consumer prices, notably driven by an unexpected surge in rental costs.
Traders are increasingly betting on the possibility of the U.S. Federal Reserve delivering another interest-rate hike this year, with a likelihood of maintaining higher rates for an extended period next year.
Fed Bank of Boston President Susan Collins emphasized that the latest inflation data underscores an uneven path towards achieving price stability, reiterating her belief that the central bank might need to raise rates once again to combat inflation.
European Central Bank policymakers expressed cautious optimism on Thursday, indicating that inflation might be on track to reach 2% even without additional rate hikes.
In other precious metals markets, spot silver recorded a 0.3% increase, closing at $21.90 per ounce. Meanwhile, platinum observed a 0.2% decline, closing at $866.68, and palladium dropped by 0.4%, closing at $1,139.73.
Economic Calendar (GMT):
0130: China PPI, CPI YY for September
0300: China Exports, Imports YY for September
0300: China Trade Balance for September
1230: U.S. Import Prices YY for September
1400: U.S. University of Michigan Sentiment Preliminary for October
