Gold ticked higher on Friday, reversing earlier declines as oil prices retreated, with investors monitoring developments in the Middle East for fresh cues on energy-driven inflationary risks and the outlook for U.S. interest rates.
Spot gold XAU= rose 0.4 per cent to $4,061.36 per ounce by 1115 GMT, after dropping about 0.6 per cent earlier, while U.S gold futures for August delivery GCcv1 for August delivery gained 0.3 per cent to $4,063.60.
“Gold has shifted from earlier in negative territory to slightly positive, driven by lower oil prices, reducing pressure on the Fed to adjust its rates,” said UBS analyst Giovanni Staunovo.
“Our view remains that the Fed will be on hold and that should be price supportive of gold over the coming months,” he added.
Brent crude LCOc1rose 7 per cent on Thursday, settling above $100 for the first time since May after Yemen’s Houthis said they attacked two Saudi oil tankers in the Red Sea.
However, prices retreated below that milestone on Friday. O/R
Elevated oil prices due to Gulf supply disruptions have been weighing on gold prices as they raise expectations of higher-for-longer interest rates, which tend to diminish the appeal of non-yielding gold.
Investors are now awaiting the U.S. Federal Reserve’s policy meeting next week, when it is largely expected to keep rates unchanged.
Traders are pricing in about an 80 per cent chance of a rate hike in September, according to the CME FedWatch Tool. FEDWATCH
The European Central Bank kept interest rates unchanged as expected on Thursday but held the door open to another increase in September.
Elsewhere, India’s gold discounts widened to their highest level in seven weeks as demand remained subdued after a price rebound earlier in the week deterred buyers, while top consumer China saw an improvement in buying interest. GOL/AS
Among other metals, spot silver XAG= rose 1.3 per cent to $58.43 per ounce, platinum XPT= gained 0.2 per cent to $1,602.74, and palladium XPD= inched up 0 per cent to $1,256.95.
(Reporting by Sukanya Mitra in Bengaluru; Editing by Susan Fenton and Varun H K)
