Gold inches higher but heads for weekly loss on US Fed hike concerns
Markets see an 85 per cent chance of a 25-basis-point rate hike in Decembe
Gold prices saw a slight increase on Friday, Nov 13, moving past the year's lowest point, but they continued their weekly decline due to increasing oil prices, which raised inflation concerns and reinforced predictions of sustained higher US interest rates. Spot gold gained 0.2% to $3,883.05 per ounce by 0032 GMT, after falling 3% on Thursday.
Gold has slipped 4.4% this week. The December contract for US gold futures hung steady at $3,887. US President Donald Trump announced on Thursday that the US had no need for a deal with Iran, dampening hopes for a speedy resolution to the Middle East conflict.
Oil prices surged on Thursday following attacks on Saudi energy infrastructure and shipping disruptions in the Strait of Hormuz, which threatened global oil supplies. Beth Hammack, president of the Cleveland Federal Reserve, expressed on Thursday that she did not think the US central bank needed to adopt more aggressive interest rate hikes to tackle persistently high and widening inflation.
The Federal Reserve may need to hike rates further to address the inflation issue, according to San Francisco Fed President Mary Daly, without implying a rush to do so.
CME’s FedWatch tool indicates an 85% chance of a 25-basis-point rate hike in December, while the likelihood of a 50-basis-point increase is priced at 14.5%. Despite gold's reputation as an inflation hedge, higher interest rates raise the opportunity cost of holding non-yielding bullion, diminishing its attractiveness to investors.
The number of Americans filing new unemployment benefit claims rose more than anticipated last week but remained stable, indicating a resilient labor market, allowing the Fed to concentrate on controlling inflation.
Elsewhere, the European Central Bank will likely make the final interest rate increase in its current cycle in December, according to most polled economists by Reuters. However, over a third anticipate another rise in early 2027 as inflation remains double the 2% target. Silver rose 0.1% to $50.07 per ounce, platinum climbed 0.3% to $1,523.55, and palladium increased 0.3% to $996.84. However, all three metals were expected to see weekly declines.
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