Dollar Weakness Drives Gold Gains Amid Rate Hike Uncertainty

Gold prices rose on Friday and were poised to end the week in positive territory due to a weaker US dollar. The yellow metal gained 0.7% to reach $4,379.95 per ounce by 1:40 pm EDT (1740 GMT). This marks a weekly gain of around 0.9%. US gold futures settled 0.4% higher at $4,437.30.

The US dollar index slipped 0.3%, making greenback-priced bullion more affordable for buyers overseas. Jim Wyckoff, a market analyst at American Gold Exchange, attributed the support to the lower US dollar index, saying it's 'a friendly outside market that's supporting gold today.'

Gold drew support from in-line U.S. inflation readings this week and an unexpected decline in U.S. nonfarm payrolls in July. This significantly lowered expectations of an increase in interest rates next month, with most analysts now seeing the central bank holding the current 3.50% to 3.75% range.

Markets are pricing in a 33% chance of a rate hike in September versus 55% last week, according to CME's FedWatch Tool. Commerzbank noted that as they expect the Fed not to raise interest rates, gold price still has further upside potential.