Gold prices continued to rise on Friday and were on track for their strongest weekly gain since January, supported by weaker oil prices and easing inflation expectations.

As of 01:56 GMT, spot gold was up 0.4% at $4,254.11 per ounce, after hitting a seven-week high in the previous session. Gold had gained more than 5% for the week. U.S. gold futures rose 0.3% to $4,312.00 per ounce.

Lower Oil Prices Support Gold

Expectations that tensions in the Middle East could ease have pushed oil prices lower and reduced inflation concerns.

Lower energy prices may reduce pressure on the Federal Reserve to keep interest rates higher for longer. This is generally supportive for gold, as the precious metal does not offer a yield and tends to face pressure when interest rates remain elevated.

Markets Await U.S. Nonfarm Payrolls

The next major focus for investors is the U.S. nonfarm payrolls report for July.

The data is expected to provide further clues about the Federal Reserve’s interest-rate outlook.

According to the CME FedWatch Tool, markets are currently pricing in around a 55% probability of a U.S. rate hike in September, down from 63% a week earlier.

Other Precious Metals Also Gain

• Spot silver rose 0.8% to $61.96 per ounce

• Platinum gained 0.4% to $1,735.71 per ounce

• Palladium fell 0.3% to $1,367.06 per ounce

Despite palladium’s slight decline in the session, all three metals were heading for weekly gains.

Conclusion

Gold’s rally is currently being supported by weaker oil prices, easing inflation expectations and the possibility that the Federal Reserve may adopt a less hawkish stance than previously expected.

In the short term, the U.S. nonfarm payrolls report will be a key factor influencing interest-rate expectations and gold-price volatility. However, as long as the $4,000 per ounce level continues to hold, the broader bullish outlook remains well supported.

Source: Reuters