Gold prices steady near one-week low ahead of US inflation data

Gold prices are on track for a third consecutive weekly decline, despite a slight gain on Friday, as expectations for a Federal Reserve interest rate hike intensify. Traders are keeping a close eye on a key US inflation report due later in the day. Over the past week, spot gold has dropped more than 2% and is currently trading at $4,326.88 per ounce, up 0.3% for the day.

US gold futures for December delivery also declined by 0.9% to $4,367.70. The US Producer Price Index for final demand increased by 0.4% in August, following a revised 0.1% rise in July. This data has led traders to increase their belief that the Fed will raise interest rates during their upcoming meeting, causing spot gold to fall nearly 2%.

The upcoming US consumer price inflation report at 12:30 GMT could further pressure the metal, as a stronger-than-expected reading would signal several interest rate increases, potentially driving up Treasury yields and the dollar. Wael Makarem, a financial markets strategist at Exness, noted that ongoing Middle East tensions could also continue to weigh on gold through higher inflation expectations.

Despite being considered an inflation hedge, rising interest rates often exert downward pressure on gold, which does not generate any yield. Recent developments in Yemen saw Iran-aligned Houthis seize control of the port city of Mocha and advance down the Red Sea coast to strategic islands, as reported by military sources. This news came hours after US President Donald Trump expressed optimism that the Iran war would conclude after the midterm elections.

Oil prices have also risen, with both major benchmarks poised to close the week above the $100-a-barrel level for the first time since mid-May. Among other metals, spot silver decreased by 0.1% to $63.49 per ounce, slipping 4% for the week, while platinum rose by 0.3% to $1,782.76 and palladium increased by 0.5% to $1,288.00, both metals heading for weekly declines.