Gold rises on hopes Fed will ease rate hikes

Gold prices were set on Friday for their biggest weekly gain since April, after rallying close to a one-month high, as markets scale back expectations of further US interest rate hikes, sending the dollar to its lowest in more than one year.

Spot gold held steady at $1,961.79/oz by 3.19am GMT, and up nearly 2% for the week. US gold futures rose 0.1% to $1,965.80.

Making gold less expensive for overseas investors, the dollar index touched its lowest level since April 2022.

Gold has got room to sort of expand from here, said Matt Simpson, a senior market analyst at City Index, adding that the next major levels could be $1,985/oz to $2,000/oz.

Data on Thursday showed US producer prices barely rose in June, providing more evidence the economy had entered a disinflation phase.

Meanwhile, the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, indicating the US labour market remained tight.

Federal Reserve governor Christopher Waller said on Thursday he is not ready to call an all clear on US inflation and favours more rate hikes this year, saying the upcoming July meeting should bring an increase.

Interest rate futures showed markets mostly priced in another rate hike from the Federal Open Market Committee at its July 25-26 meeting, but expectations of further increases have dropped.

However, if the Fed does indicate more rate increases, “that could provide some nervousness [among gold investors],” Simpson added.

Gold is used as a safe investment during times of political and financial uncertainty, but higher interest rates increase the opportunity cost of holding non-yielding bullion.

Among other precious metals, spot silver was flat at $24.8402/oz, set for its biggest weekly gain since March.

Platinum shed 0.2% to $971.11 and palladium dropped 1.1% to $1,280.95, but were poised for a second straight weekly rise.

Reuters