Gold edges up on weaker dollar but heads for a weekly decline

what happened

Gold moved slightly higher on Friday as the greenback lost ground, though the metal was still on course for a modest decline over the week. Spot gold gained 0.2% to $4,179.19 an ounce as of 06:33 GMT, but was 0.4% lower so far this week. December US gold futures added 0.7% to $4,200.50.

OANDA senior analyst Kelvin Wong said gold has been stuck in a range, with the floor near $4,075 tested earlier in the week, and that inflation keeps coming in hotter than forecasters expected. The dollar was on track for its first weekly drop in five weeks, which makes bullion cheaper for buyers outside the US. US producer prices rose last month by the most in four and a half years, pointing to price pressures spreading beyond energy. The earlier consumer price report on Wednesday showed inflation picked up in September, driven by a jump in gasoline costs.

CME FedWatch data show traders pricing a 13% chance of a rate increase later this month and 89% for December. Fed Chairman Kevin Warsh struck an upbeat tone about US economic strength, while Chicago Fed President Austan Goolsbee called this week's stronger inflation figures “discouraging”. Silver rose 0.5% to $57.73 an ounce, platinum gained 0.3% to $1,630.56 and palladium climbed 0.8% to $1,135.11, although all three metals were heading for weekly losses.

why it matters

For gold, the key issue is the mix of sticky inflation and rising odds of Fed tightening. Higher rates raise the cost of holding a metal that pays no yield, so the weaker dollar may offer only short-lived support. Separately, several large Indian mutual funds suspended bulk subscriptions to gold exchange-traded funds ahead of the festive season, when demand typically picks up, a sign that flows can shift quickly.

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