Gold prices edged up by 0.1% to $4,052.78 per ounce on Friday, recovering from a 2% drop in the previous session. The increase comes amid heightened geopolitical tensions in the Middle East and investor anticipation of the U.S. Federal Reserve's policy meeting next week.
Spot gold has seen a weekly increase of 0.9%, buoyed by dip-buying earlier in the week. U.S. gold futures for August delivery also rose, settling 0.5% higher at $4,070.80. Despite the rise, gold has fallen about 23% since the U.S.-backed war with Iran began in late February, pressured by expectations of prolonged high interest rates due to war-driven inflation.
Brent crude oil prices fell over 4% after a significant rise of over 7% in the previous session, following reports of Iranian-aligned Houthis striking two Saudi oil tankers in the Red Sea. This development has added to the volatility in the commodities market.
“Gold and silver are carving out a base around $3,950 and $55, respectively, despite relentlessly higher yields.”
Tai Wong, Independent Metals Trader
Analysts at ING noted that recent strength in bullion is largely driven by dip-buying and short covering, with $4,000 being a critical near-term level to watch. Elevated oil prices and rising yields are expected to cap any significant recovery in gold prices.
Among other metals, spot silver rose 0.8% to $58.11 per ounce, while platinum and palladium fell by 0.8% and 1.4%, respectively.
Background
The outcome of the U.S. Federal Reserve's policy meeting next week is eagerly awaited by investors, with a large expectation that rates will remain unchanged. Traders are pricing in about an 82% chance of a U.S. rate hike in September, according to the CME FedWatch Tool.
As the market remains sensitive to geopolitical developments and economic data, investors should keep an eye on the Federal Reserve's policy decisions and ongoing tensions in the Middle East, which could further influence commodity prices.
