Gold prices rose more than 1% to around $4,180 an ounce on Friday, hitting a one-week high as investors weighed a weaker US dollar and easing oil prices against the likelihood of further interest rate hikes by the Federal Reserve. Crude prices retreated after their recent rally when US President Donald Trump said Washington would not launch an attack on Iran before next month’s US midterm elections, as diplomatic efforts to end the war continued. The conflict has unsettled global energy markets, stoking inflation worries.
On the policy front, St. Louis Fed President Alberto Musalem said on Thursday that additional monetary tightening may still be necessary to return inflation to the central bank’s 2% target, though he declined to indicate how he might vote at this month’s FOMC meeting. According to the CME FedWatch Tool, futures markets were pricing in less than a 20% probability of a rate increase in October, but better than an 80% chance of at least one 25-basis-point hike by December.