Dollar Weakness Lifts Gold as Rate Hike Odds Plummet

Gold prices rose by 0.6% to $4,376.02 an ounce on Friday as the US dollar weakened and new inflation and jobs data reduced the likelihood of a September rate hike from the Federal Reserve.

The dollar index fell by 0.3%, making gold cheaper for non-US buyers and lifting demand. However, the bigger driver was interest-rate expectations, with markets marking down the odds of a rate hike to 31% from about 55% a week ago.

This shift in Fed pricing reduced the 'opportunity cost' of holding gold, an asset that doesn't pay interest, making it easier to justify in portfolios. But the setup can quickly flip, and Reuters flagged that oil's rise on Middle East shipping risks could reignite inflation worries and revive bets on tighter policy.