Gold eyes best week in over 2 years on hopes of less aggressive Fed

BENGALURU – Gold prices edged higher on Friday en route to their biggest weekly gain in more than two years as US data pointing to slowing inflation boosted hopes that the Federal Reserve would slow its aggressive rate hikes.

Spot gold was up 0.4 per cent at US$1,761.73 an ounce, as at 2.10pm on Friday. Prices have risen 4.7 per cent so far in the week, heading for their biggest gain since July 2020.

United States gold futures rose 0.6 per cent to US$1,764.50.

The dollar index inched 0.3 per cent lower and was headed for its biggest weekly drop since March 2020. A weaker US dollar makes gold more appealing to overseas buyers.

US consumer prices rose less than expected in October,

indicating that inflation was slowing, which raised hopes that the Fed will begin scaling back its hefty rate hikes.

“The softer-than-expected CPI (consumer price index) print supports the case for a step down in the pace of hikes at the December Fed meeting that can translate into a resumption of the dollar trend lower, providing a window for gold to stage a mild recovery,” said OCBC FX strategist Christopher Wong.

If the euphoria in the market continues, gold prices could rise much higher and hit the US$1,762 to US$1,767 range in the near term, Mr Wong said.

Market participants now see a 71.5 per cent chance of a 50 basis-point rate hike at the Fed’s December meeting.

Gold is considered a hedge against inflation, but rising rates increase the opportunity cost of holding non-yielding bullion.

The biggest challenge facing central bankers now is bringing inflation down, International Monetary Fund managing director Kristalina Georgieva said on Thursday.

Silver rose 1.5 per cent to US$21.99 an ounce and was poised for its second straight weekly advance.

Platinum rose 1.8 per cent to US$1,050.88 an ounce, heading for its biggest weekly gain since February 2021. Palladium gained 0.1 per cent to US$1,965.75. REUTERS