Gold prices steadied around $4,350 an ounce, capping a volatile week, as the Federal Reserve's first interest rate hike since 2023 and a decline in oil prices helped alleviate worries about inflation. This stabilization came after gold had gained nearly 2% on Thursday, recovering much of the losses incurred over the previous three sessions. Treasury yields also declined across maturities following the Fed's unanimous decision to raise rates by a quarter percentage point, which in turn reduced some of the pressure on gold, as the metal typically underperforms when bond yields are higher because it does not offer interest.
Despite the Fed's rate hike, gold extended its recovery. Oil's decline played a significant role by reducing inflation concerns, especially as supply disruptions in the Middle East appeared set to ease. Higher energy prices had previously reinforced expectations for elevated interest rates, which is negative for non-yielding bullion. The precious metal was further boosted on Thursday when Saudi Arabia moved to restore flows along its critical East-West pipeline within days, pushing gold back above its 100-day moving average. However, it still remains nearly a fifth below the record high reached in January.
Goldman Sachs Group Inc. analysts, including Lina Thomas, adjusted their year-end target for gold from $4,900 an ounce to $4,650, suggesting that while the Fed hikes are likely to slow the rally, they won't derail it. Thomas noted that much of the expected tightening is already priced into ETF demand, and strong central bank purchases continue to offset the drag from higher rates. She also highlighted resilient call-option demand for gold as a macro-policy hedge. Investors have been flocking to bullion, with gold-backed exchange-traded funds experiencing eight consecutive days of inflows, the longest streak since October 2025. Spot gold rose 0.3% to $4,355.90 an ounce in New York, while silver advanced 1.8% to $66.38 an ounce.
