Gold Hits $4,390 as Fed Hikes Rates and Oil Falls

Spot gold prices closed at 4,390.11 U.S. dollars per troy ounce on Friday. This marked a 1.2 percent increase and the first weekly gain in four weeks.

The rise occurred despite the Federal Reserve raising interest rates by 25 basis points. Falling oil prices also eased inflation concerns that had pressured the metal earlier.

Rate hikes offset by softer oil

The Fed increased rates to a range of 3.75 to 4 percent on Wednesday. This move typically reduces gold's appeal by making yield-bearing assets more attractive to investors.

However, Brent crude prices fell for a third consecutive day. This decline reduced inflationary pressures and supported the demand for gold as an inflation hedge.

Dollar strength limits global buying

The U.S. dollar strengthened to its highest level in over seven weeks. This made gold more expensive for holders of other currencies and reduced investor appetite.

Market participants see a 55 percent chance of another rate hike in October. This potential further tightening adds to the headwinds facing the precious metal.

Asian demand shows mixed signals

Gold demand in India remained sluggish as buyers anticipated price drops. In contrast, China saw stable premiums supported by strong investment demand.

The Bank of Japan also raised rates to a 31-year high. Analysts note that gold is now testing resistance levels between 4,400 and 4,440 dollars.