Gold Surges on Easing Oil Prices, Interest Rate Fears

Gold prices surged to their highest level in a week on Friday, as easing oil prices alleviated concerns about prolonged inflationary pressures. The metal is now poised for its first weekly gain in four weeks.

The spot price of gold rose by 0.3% to $4,352.39 per ounce by 11:17 a.m. EDT (1517 GMT), after hitting its highest level since September 11 earlier in the session. US gold futures edged 0.2% lower to $4,390.30.

According to Chris Gaffney, president of world markets at EverBank, 'easing of oil prices reduces inflation pressures as oil has been the main driver of overall inflation... Precious metal investors had expected a (US) rate hike and piled into short positions to take advantage of the expected selloff in gold. These positions have been rapidly unwound.'

Gold's appeal was further diminished by higher interest rates, which make yield-bearing assets more attractive.