Gold adds over 1% on easing oil prices, softer dollar

Gold prices surged more than 1 percent on Friday, driven by a combination of falling oil prices and a weaker US dollar, according to market reports. The spot price of gold rose 1.4 percent to $4,189.99, with a weekly gain anticipated. US gold futures for December delivery also increased by 1.4 percent, trading at $4,215.30 per ounce.

The drop in oil prices was attributed to reduced concerns about Middle East supply disruptions following US President Donald Trump's statement that the country would not attack Iran before the US midterm elections. This, in turn, eased the likelihood of further Federal Reserve interest-rate hikes, which has negatively impacted the greenback and contributed to the bullish sentiment for gold.

Nikos Tzabouras, a senior market analyst at Jefferies-owned Tradu.com, noted that a weaker dollar makes gold less expensive for holders of other currencies, but also highlighted that gold still faces challenging market conditions, such as macro-geopolitical uncertainty and inflationary pressures. These factors, along with elevated bond yields and the expectation of future Fed rate hikes, keep the opportunity cost of holding gold high.

While gold is often viewed as a hedge against inflation, higher interest rates reduce its appeal as a non-yielding asset. Fed President Alberto Musalem indicated that the US central bank may need to raise rates again to bring inflation back to its 2 percent target, though he did not specify the actions policymakers should take at their upcoming meeting.

In the previous month, the Federal Reserve had unanimously raised the policy rate by 0.25 percent. Traders currently price in a 19 percent chance of a rate hike in October and an 84 percent probability of at least one 0.25 percentage-point increase by December, as per the CME's FedWatch tool. Other precious metals also showed gains, with spot silver rising 1.7 percent to $60.36 per ounce, platinum climbing 3.4 percent to $1,690.49, and palladium increasing 3.7 percent to $1,162.18.