Gold Prices Rise Amid Weak Dollar Despite Interest Rate Hike Expectations
Gold prices rose on Friday, driven by a decline in the value of the U.S. dollar, achieving notable weekly gains despite limited impacts from remarks by Federal Reserve officials, who have dampened investor expectations for a potential interest rate cut next month.
As of 01:27 GMT, spot gold was up 0.2% at $4,180.57 per ounce, marking a cumulative increase of 4.5% for the week. In contrast, December gold futures dipped slightly by 0.3%, settling at $4,183.40 per ounce.
The dollar index, which gauges the performance of the U.S. currency against a basket of rivals, has shown a downward trend for the second consecutive week, enhancing gold's appeal as an alternative investment for holders of other currencies.
However, these gains are constrained by a prevailing pessimism regarding interest rates, with an increasing number of Federal Reserve policymakers expressing reluctance to ease monetary policy, citing ongoing inflation concerns despite two rate cuts earlier this year.
In this context, Fed Chair Jerome Powell has urged caution regarding further cuts this year, pointing to a lack of available economic data following a recent 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 noteworthy 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 has raised investor concerns and disrupted the flow of economic data, contributing to the prevailing uncertainty.
In related markets, silver prices rose by 0.6% in spot transactions to $52.64 per ounce, while platinum and palladium also increased by 0.6%, reaching $1,589.80 and $1,435.20 per ounce, respectively.
