Gold Hits $4,387 Amid Oil Slump and Fed Hike
Gold extended its recovery to $4,387.14 on Friday. Oil prices fell for a third day. The Federal Reserve raised rates to 4.00%.
Gold prices reached $4,387.14 in European trading on Friday. This level marks the highest price since September 11. The metal gained 1.1% from an opening price of $4,341.23. Buyers stepped in after the asset hit a six-week low of $4,235.30 earlier in the week. This move represents a second consecutive day of gains.
The recovery aligns with a broader decline in energy costs. Global oil prices fell 0.5% on Friday. This marks the third consecutive session of losses. The drop moves crude further away from four-month highs. Market participants cited reduced concerns over supply security as a primary driver.
Oil Supply Concerns Ease
Saudi Arabia confirmed plans to restore the East-West pipeline. The line shut down following a Houthi attack. The kingdom aims to resume operations as soon as possible. Additionally, Saudi Arabia found alternative routes to deliver crude to Asian buyers via Oman. These developments reduce the perception of structural supply risk.
Diplomatic efforts also contributed to the price drop. Reports indicate China asked Iran to rein in the Houthis. The Houthis recently intensified military actions against Saudi Arabia. This diplomatic intervention helps stabilize the regional security landscape. Investors view this as a positive signal for sustained global oil flows.
Dollar Weakness Supports Metals
The US Dollar Index fell 0.1% on Friday. This is the second straight session of losses. The currency moved away from its seven-week high. A weaker dollar lowers the cost of gold for holders of other currencies. This dynamic typically boosts demand for precious metals.
US Treasury yields also declined. The 10-year yield dropped 0.2% on the session. This marks a second consecutive day of losses. The yield moved away from its highest level in 19 years. Lower yields reduce the opportunity cost of holding non-yielding assets like gold.
Fed Hike Alters Rate Outlook
The Federal Reserve raised its benchmark interest rate by 25 basis points. The target range is now 3.75% to 4.00%. This is the first increase since July 2023. The vote was unanimous, with all 12 committee members in favor. Chair Kevin Warsh cited elevated inflation as the primary reason for the move.
The central bank raised its 2025 growth forecast to 2.3%. It also increased the headline inflation forecast to 3.7%. The target interest rate projection for this year rose to 4.25%. Market expectations shifted following the announcement. The probability of a rate hike in October rose to 53%. The probability of a hike in December stands at 90%.
