The price of gold for immediate delivery reached $4,390.11 per ounce, indicating a 1.2 percent increase for this precious metal. Last week, the price of gold rose by about one percent, and in the U.S. futures market, the price closed at $4,424.90.
Impact of Falling Oil Prices and Rising Interest Rates
Chris Gaffney, head of global markets at EverBank, stated that the decline in oil prices has eased inflationary pressures and led precious metals investors to increase their short positions in anticipation of a potential drop in gold prices. However, these positions are now being rapidly closed.
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The decline in Brent crude oil prices continued for the third consecutive day on Friday due to reduced concerns about supply disruptions. This has somewhat alleviated inflationary worries, but the potential for a shock in Middle Eastern oil supply remains a major concern for the market.
Changes in Dollar Value and Interest Rates
Meanwhile, the U.S. dollar index has reached its highest level in over seven weeks, making gold, which is priced in U.S. dollars, more expensive for holders of other currencies. The Federal Reserve raised interest rates by 0.25 percent last Wednesday, bringing the range to 3.75 percent to 4 percent, and indicated the possibility of further rate increases in the coming months.
According to the CME FedWatch Tool, traders now predict a 55 percent chance of another U.S. interest rate hike at the Federal Reserve's next policy meeting in October. While gold is typically seen as a hedge against inflation, high interest rates affect its appeal as a non-yielding asset.
The Bank of Japan also raised interest rates to the highest level in 31 years and announced its readiness to continue increasing borrowing costs. These changes in global interest rates have also impacted demand for gold.
Gaffney added, "Gold is currently testing the resistance range of $4,400 to $4,440, and breaking through this range could pave the way for further increases in gold prices." In the market for other precious metals, the price of silver rose by 2.3 percent to $66.70 per ounce.
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