Gold rises on weaker dollar as inflation data cements rate-hold bets

Gold advanced on Friday and was headed for a weekly gain, buoyed by a weaker dollar after in-line U.S. inflation readings this week tipped the scales in favor of an interest rate hold by the Federal Reserve next month.

Spot gold was up 0.7% at $4,379.95 per ounce by 1:40 p.m. EDT (1740 GMT). Prices declined 1.3% in the previous session ‌on profit-taking after ⁠touching ⁠their highest level since June 5. Bullion is up around 0.9% for the week so far.

U.S. gold ​futures settled 0.4% higher at $4,437.30.


"The lower U.S. dollar index is a friendly outside market that's ​supporting gold today," said Jim Wyckoff, a market analyst at American Gold Exchange.

The U.S. dollar index slipped 0.3%, making greenback-priced bullion more affordable for buyers overseas. [USD/]

Gold drew support from an unexpected decline in U.S. nonfarm payrolls in ⁠July, and ‌inflation readings this week that were largely in line with expectations. This significantly lowered expectations of an increase in interest rates next month, ⁠with most analysts now seeing the central bank holding the current 3.50% to 3.75% range.

Markets are pricing in a 33% ​chance of a rate hike in September versus 55% last week, CME's FedWatch Tool showed. [FEDWATCH]

"As we expect the Fed not to raise interest rates, gold price therefore still has further upside potential," Commerzbank said in a note.

Lower interest rates tend to support non-yielding gold.

Meanwhile, transit through the Strait of Hormuz appeared to grind to ‌a near-standstill after two more ships were attacked and the United States said it could maintain a naval blockade of Iran indefinitely.

Oil ​prices eyed weekly ​gains on the ⁠news. [O/R]

"If oil prices continue to rise, that's going to be a bearish element for the metals market because it would aid inflation and prompt central banks to raise interest ​rates," Wyckoff said.

Elsewhere, gold discounts in India widened to more than two-month highs. [GOL/AS]

Spot silver climbed 0.7% to $64.88 per ounce, platinum gained 1.8% to $1,746.97, and palladium added 1.1% to $1,320.93. Silver and platinum were poised for weekly gains, while palladium was set for a weekly loss.