Key Takeaways
- Gold prices edged higher on Friday due to lower oil prices and a subdued US dollar.
- The Federal Reserve raised interest rates, but Goldman Sachs expects gold prices to remain strong.
- Market participants remain cautious amid geopolitical tensions and global monetary policy outlook.
Gold prices inched higher on Friday, supported by lower oil prices and a weaker US dollar. Spot gold was up 0.2% at $4,346.65 per ounce by 0145 GMT, while US gold futures were down 0.3% at $4,385.70.
Oil prices fell by 1%, contributing to the overall market sentiment, while the dollar remained subdued after retreating from recent highs. A weaker dollar makes gold less expensive for holders of other currencies, providing support to the metal.
Ahmad Assiri, research strategist at Pepperstone, noted that the link between gold and oil could weaken if oil prices correct sharply, easing inflation and rate-hike expectations. He also mentioned that extreme escalation could force the world to counter recession, which could impact gold prices.
The Federal Reserve raised interest rates on Wednesday and indicated more hikes in the coming months. Despite this, Goldman Sachs kept its end-2027 gold price forecast at $5,400, stating that tighter policy is likely to slow the bullion’s rally but not derail it.
Higher interest rates can curb gold demand by increasing the appeal of yield-bearing assets. However, the Bank of England kept interest rates on hold on Thursday but warned that they might have to go up. The Bank of Japan is set to raise rates to a 31-year high on Friday and pledge to deliver more to counter inflation risks.
Assiri further stated, 'This high-rates environment, in my view, caps near-term gold upside… However, if rising yields stem from deteriorating fiscal confidence, war-related spending and wider deficits, as opposed to rate expectations, a weaker dollar could accompany higher yields, possibly turning the relationship supportive for gold.'
Spot silver rose 0.7% to $65.61 and was headed for a weekly gain. Platinum gained 1% to $1,785.80, while palladium added 0.2% at $1,294.41.
Market participants are keeping a close eye on developments in the Middle East and the outlook for global monetary policy. These factors are influencing the overall sentiment in the precious metals market.
This high-rates environment, in my view, caps near-term gold upside… However, if rising yields stem from deteriorating fiscal confidence, war-related spending and wider deficits, as opposed to rate expectations, a weaker dollar could accompany higher yields, possibly turning the relationship supportive for gold.
Ahmad Assiri, Research Strategist at Pepperstone
