Analysis of the Upward Trend in Gold
The global price of gold recorded a weekly increase amid a weakening dollar index and changing expectations regarding the Federal Reserve's interest rates, reaching $4,379.
The spot price of gold rose 0.7 percent on Friday to $4,379.95 per ounce. The precious metal had reached its highest level since June 5 in Thursday’s trading, but fell 1.3 percent under the influence of investor profit-taking. Nevertheless, gold gained approximately 0.9 percent over the past week.
The price of gold futures in the U.S. market rose 0.4 percent, closing at $4,437.30 per ounce.
Jim Wyckoff, a market analyst at American Gold Exchange, said: “A weaker dollar index is a positive factor in the foreign market that supports gold prices.”
The U.S. dollar index fell 0.3 percent, making gold, which is priced in the U.S. currency, cheaper for foreign buyers holding other currencies.
Gold prices were supported by an unexpected decline in U.S. nonfarm employment figures in July, as well as inflation data from the previous week that largely met expectations. This significantly weakened expectations for an interest-rate hike next month, with most analysts now forecasting that the U.S. central bank will maintain interest rates at the current range of 3.50 to 3.75 percent.
According to CME’s FedWatch tool, traders reduced the probability of a U.S. interest-rate hike in September from 55 percent the previous week to 33 percent. Lower interest rates increase the attractiveness of non-yielding assets such as gold.
Commerzbank said in a note: “As the Federal Reserve is expected not to raise interest rates, gold prices still have further upside potential.”
Oil prices also recorded a weekly increase in Friday’s trading.
Wyckoff said: “If the upward trend in oil prices continues, this will be a negative factor for the precious metals market because it fuels inflation and encourages central banks to raise interest rates.”
According to Reuters, the discount on gold prices in India reached its highest level in more than two months.
In the other precious metals market, the price of silver rose 0.7 percent to $64.88 per ounce. Platinum rose 1.8 percent to $1,746.97 per ounce, while palladium increased 1.1 percent to $1,320.93 per ounce. Silver and platinum recorded weekly gains, while palladium suffered a weekly decline.