Gold is on track for its third weekly decline, holding steady near $4,315 an ounce on Friday. This follows a 1.8% drop in the previous session, bringing prices to their lowest level since early August. The dip is largely attributed to surging oil prices and the latest US inflation report, which together have strengthened the case for the Federal Reserve to increase interest rates at its upcoming meeting.
The US producer price index (PPI) increased by 0.4% last month, marking the largest rise since May. This data, released on Thursday, indicates growing inflationary pressures, primarily driven by higher energy costs. Escalating conflict in the Middle East has contributed to the rise in energy prices, further impacting the PPI.
The prospect of an interest rate hike by the Federal Reserve, fueled by these inflationary signals, tends to make non-yielding assets like gold less attractive to investors. Consequently, gold is trading as a 'rates-and-dollar market' rather than a traditional safe-haven asset, as higher yields work against the metal more quickly than geopolitical demand supports it.
