Gold prices fell on Friday, heading towards the largest weekly decline in over four months, amidst rising oil prices and the release of strong U.S. economic data that bolstered expectations for the Federal Reserve (the U.S. central bank) to keep interest rates elevated for a longer period.
Spot gold declined by 0.1% to $4018.69 per ounce by 00:36 GMT, marking its lowest level since August 3. Prices have dropped 3.4% since the beginning of the week, the largest weekly decline since June, while U.S. gold futures for December delivery fell by 0.6% to $4033.70 per ounce.
The decline in the yellow metal coincided with an approximately 4% rise in oil prices on Thursday, reaching their highest levels in five months, following Houthi attacks on Saudi Arabia that raised concerns about worsening energy supply disruptions.
The rise in energy prices reinforces expectations for continued inflationary pressures, which may prompt the U.S. central bank to maintain high interest rates for a longer duration, increasing the cost of holding gold, which does not yield returns.
In related news, U.S. economic data showed a decrease in new unemployment claims to their lowest level in about 57 years last week, indicating a modest improvement in job growth in October.
Investors are focused on the Federal Reserve's monetary policy meeting scheduled for October 27 and 28, as well as the upcoming personal consumption expenditures data to be released next week, due to its impact on interest rate expectations.
Market expectations indicate that the probability of an interest rate hike by the U.S. next week does not exceed 7%, while the chances of a hike in December are around 81%.
As for other precious metals, silver fell by 0.1% to $54.46 per ounce, platinum decreased by 0.4% to $1563.67, and palladium dropped by 0.5% to $1051 per ounce, with all three metals trending towards weekly losses.