Gold Prices Rise Weekly Amid Weak Dollar Despite Interest Rate Hike Expectations

Gold prices rose during Friday's trading, marking significant weekly gains as the U.S. dollar weakened. This occurred even as statements from Federal Reserve officials limited the impact on investor expectations regarding a potential interest rate cut next month.

As of 01:27 GMT, spot gold was up 0.2% at $4,180.57 per ounce, reflecting a cumulative weekly gain of 4.5%. In contrast, December gold futures saw a slight decline of 0.3%, trading at $4,183.40 per ounce.

The dollar index, which measures the performance of the U.S. currency against a basket of competitors, declined for the second consecutive week, enhancing gold's appeal as an alternative investment for holders of other currencies.

However, these gains were tempered by a pessimistic outlook regarding interest rates, as more U.S. Federal Reserve policymakers expressed reluctance to ease monetary policy, citing ongoing inflation concerns despite two interest rate cuts this year.

In this context, Fed Chair Jerome Powell emphasized the need for caution before implementing any further cuts this year, given the lack of available economic data, following last month’s 25 basis point reduction.

These statements have directly influenced market expectations, with traders currently estimating only a 51% chance of a 25 basis point rate cut next month, down from 64% in the previous session.

It is important to note that gold, as a non-yielding asset, tends to perform better in low interest rate environments and during periods of economic uncertainty. The recent resumption of U.S. government activities after a 43-day shutdown, which raised investor concerns and hindered the flow of economic data, has contributed to the prevailing uncertainty.

In related news, silver prices in spot transactions increased by 0.6% to $52.64 per ounce, while platinum rose by 0.6% to $1,589.80, and palladium also climbed by 0.6%, reaching $1,435.20 per ounce.