Gold Edges Up Friday, Headed for Weekly Loss on Fed Rate Hike Bets

Spot gold prices rose modestly on Friday, trading near $4,300 an ounce, as oil prices retreated on renewed diplomatic hopes between the United States and Iran over the Strait of Hormuz. Despite the session gain, gold remained on track for a weekly decline, pressured by a stronger U.S. dollar and growing market expectations for additional Federal Reserve rate hikes to combat inflation.

The dollar index held near 101.2 after touching a two-month high, while the 10-year Treasury yield remained elevated near 5.1%. The 30-year Treasury yield had approached 5.5% on Thursday, reaching its highest level in over two decades. Market pricing indicated traders were assigning a 71% probability to another 25-basis-point Fed rate increase in October, following the central bank's first rate hike in three years the previous week. Higher interest rates and bond yields generally pressure gold because the metal generates no interest income.

Oil prices dipped after Thursday's surge, as U.S. and Iranian negotiators in New York explored a phased agreement that would allow Iran to reopen the Strait of Hormuz in exchange for Washington lifting its economic blockade. Brent crude traded near $105.26 a barrel, down 1.3%, while West Texas Intermediate crude was near $92.78, down 1.9%. However, continued Houthi attacks on Saudi Arabia and unresolved shipping risks maintained a defensive premium for bullion.

Economic data released Friday reinforced Fed tightening expectations. August durable-goods orders came in virtually unchanged, while orders excluding transportation rose 0.3%—both figures beating downside expectations. Combined with stronger U.S. activity data and lower jobless claims, the readings supported the view that the Fed's rate-hiking cycle may continue. Spot silver rose more sharply, up 1.62% to near $64.760 an ounce.

Analysts noted that near-term gold direction remained closely tied to oil prices, Treasury yields, and Fed rate expectations. An Australian hedge fund manager said the current gold-price decline was temporary, noting that "the core drivers supporting long-term gold gains remain intact." Investment demand for gold had stayed resilient despite challenging macroeconomic conditions, with no material liquidation reported so far.