Gold on track for third weekly loss as US inflation data looms

Gold prices are on track for a third consecutive weekly decline as the US anticipates a potential interest rate hike, according to market analysts. Spot gold rose by 0.2% to $4,324.79 per ounce by 0020 GMT on Friday, but has slipped more than 2% for the week. U.S. gold futures for December delivery fell 1% to $4,364.70. The US inflation report is expected at 12:30 GMT.

Inflation data released on Thursday revealed that the Producer Price Index for final demand increased by 0.4% in August, following an upward revision of 0.1% in July. This data likely reinforced traders' belief that the Federal Reserve would raise interest rates at their upcoming meeting, leading to a near 2% drop in spot gold prices.

Wael Makarem, a financial markets strategist at Exness, stated that a stronger-than-expected inflation report would further support the case for additional rate hikes, potentially driving up Treasury yields and the dollar, while adding pressure to gold's price. The ongoing tensions in the Middle East may also continue to weigh on gold due to higher inflation expectations.

Despite its reputation as an inflation hedge, rising interest rates can pressure gold, which does not yield any income. Recently, Houthi rebels took control of Yemen's port city of Mocha and advanced down the Red Sea coast to strategic islands, military sources reported, shortly after US President Donald Trump expressed hope that the Iran war would end after the midterm elections.

Oil prices surged and both main benchmarks are expected to close the week above $100-a-barrel for the first time since mid-May. Silver fell 0.3% to $63.39 and has lost more than 4% for the week, while platinum eased 0.2% at $1,773.93 and palladium dropped 0.3% to $1,278.51, with both metals also set for weekly declines.