Gold nudges higher with inflation risks, Fed rate path in focus

Gold prices inched up on Friday, as market participants assessed persistent inflation concerns and the trajectory of Federal Reserve interest rates.

Fundamentals

Spot gold rose 0.3% at $4,147.77 per ounce by 0043 GMT after hitting a two-month low on Wednesday. US gold futures for December delivery gained 0.4% at $4,172.70. * Last month, the US central bank voted unanimously to raise the policy rate by a quarter of a percentage point.

St. Louis Fed President Alberto Musalem said the US central bank will need to hike rates again to bring inflation back to its 2% target, although he declined to say what policymakers should do at their meeting later this month.


Traders are pricing in an 18% chance of a US rate hike in October and an 81% probability of an increase in December, according to CME's FedWatch tool.

While gold is traditionally seen as a hedge against inflation, higher rates diminish the appeal of the non-yielding asset.

Bank of England Chief Economist Huw Pill said on Thursday that central banks had to keep their focus on fighting inflation against the backdrop of rising bond yields in financial markets around the world.

Data showed that the number of Americans filing new claims for unemployment benefits fell last week, pointing to continued labor market stability despite a sharp slowdown in job growth in September.

President Donald Trump said that the US will not launch an attack on Iran before November's US midterm congressional elections, asserting that the two countries are having "productive" talks about ending the six-month-old war.

Spot silver rose 0.5% to $59.62, platinum added 1.4% to $1,656.35 and palladium climbed 1.1% to $1,135.25. But all three metals were on track for weekly losses.

Data/Events (Gmt)

0300 China Overall Comprehensive Risk Q4

0300 Japan Overall Comprehensive Risk Q4

1400 US U Mich Sentiment Prelim Oct