Gold Rises to One-Week High as Oil Prices Ease Amid Fed Rate Hike

Gold prices surged to a one-week high on Friday as oil prices eased, shrugging off the Federal Reserve's rate hike and hawkish commentary. Spot gold rose 0.9% to $4,378.97 per ounce by 11:41 GMT.

US gold futures also increased 0.4% to $4,418.50, while oil prices fell for a third straight session. Han Tan, chief market analyst at Bybit, said the precious metal has taken the Fed's hawkish signals in its stride and is instead finding relief from falling oil prices.

Although gold is traditionally viewed as a hedge against inflation, higher rates can curb its demand by increasing the appeal of yield-bearing assets. The US Federal Reserve on Wednesday flagged more hikes in the coming months, but Goldman Sachs expects the impact of tighter monetary policy to be felt primarily through a slower near-term appreciation path rather than a lower terminal gold price.

Meanwhile, the Bank of Japan raised interest rates to a 31-year high and signalled its readiness to keep pushing up borrowing costs. If the conflict in the Middle East prolongs and oil prices remain high well into next year, that could prompt central banks to raise rates more than investors expect, which would put downward pressure on gold prices.