Gold rises on softer dollar, easing yields; Fed outlook in focus

Gold prices climbed on Friday as a weaker US dollar and falling Treasury yields made the precious metal more attractive to investors. Spot gold climbed 0.9% to US$4,169.32 per ounce by 0137 GMT, after dipping to a two-month low on Wednesday. US gold futures also rose 0.9% to US$4,194.40. The dollar's rise was tempered, making greenback-priced bullion more accessible to holders of other currencies. Meanwhile, the 10-year Treasury yield declined for the second day in a row.

Central bank intervention could pose a risk to gold's gains, particularly considering lingering inflation fears and oil price increases due to potential Middle East supply disruptions. However, ongoing demand from central banks may help cushion losses, according to Tony Sage, CEO of Critical Metals.

Traders will be closely monitoring upcoming economic data, which could shed more light on monetary policy and impact sentiment before the Federal Reserve's October meeting. The Fed raised rates by 0.25% last month, with officials expecting another hike to combat inflation, though no details were provided on future actions.

Inflation-fighting measures typically pose a challenge to gold, but higher interest rates reduce its appeal as a non-yielding asset. Despite this, gold remains a popular hedge against inflation. President Donald Trump stated that the US would not launch an attack on Iran before the November midterm congressional elections, as the two countries are reportedly engaged in productive talks to end the six-month conflict.

Spot silver rose 1.1% to US$60.00, platinum increased 2.2% to US$1,670.15, and palladium climbed 2.1% to US$1,146.98. However, all three metals were still expected to see weekly declines.