Gold inches higher but heads for weekly loss on Fed hike concerns

Gold prices edged higher on Friday, recovering from the previous session's lowest level in more than a year, but stayed on track for a weekly fall as higher oil prices stoked inflation concerns and reinforced expectations for higher-for-longer US rates.

FUNDAMENTALS

* Spot gold rose 0.2% to $3,883.05 per ounce by 0032 GMT after dropping 3% on Thursday. Bullion has declined 4.4% so far this week.


* US gold futures for December delivery steadied at $3,887.00.

* US President Donald Trump said on Thursday the US does not need a deal with Iran, tempering hopes for a swift resolution to the Middle East conflict.

* Oil prices jumped on Thursday after attacks on Saudi energy infrastructure escalated and shipping disruptions through the Strait of Hormuz threatened global oil flows.

* Cleveland Federal Reserve President Beth Hammack said on Thursday she does not believe the US central bank needs to shift to more aggressive interest rate rises to combat still-high and broadening inflation.

* The Fed will likely need to raise rates further to deal with elevated inflation, San Francisco Fed President Mary Daly said on Thursday, without suggesting it should be in a hurry about it.

* Markets see an 85% chance of a 25-basis-point rate hike in December, while the probability of a larger 50-basis-point move is priced at 14.5%, according to CME's FedWatch tool.

* Although gold is typically seen as an inflation hedge, higher interest rates increase the opportunity cost of holding non-yielding bullion, reducing its appeal to investors.

* The number of Americans filing new claims for unemployment benefits increased more than expected last week, but remained at a level consistent with a stable labour market, allowing the Fed to focus on fighting inflation.

* Elsewhere, the European Central Bank will deliver a final deposit rate hike in this cycle next month, according to most economists polled by Reuters, although more than a third expect an additional increase in early 2027 as inflation hits double the 2% target.

* Among other metals, spot silver was up 0.1% at $50.07 per ounce, platinum gained 0.3% to $1,523.55 and palladium rose 0.3% to $996.84. However, all three metals were headed for weekly declines.