Weaker Dollar Fuels Gold Rally as Rate Hike Odds Tumble

Gold prices have rebounded on Friday and are poised to record a weekly gain due to a weaker US dollar, which has reduced expectations of an interest-rate hike in September.

The spot gold price rose by 0.7% to $4,379.95 per ounce as of 1:40 pm EDT (5:40 pm GMT), while US gold futures settled 0.4% higher at $4,437.30.

Jim Wyckoff, a market analyst at American Gold Exchange, attributed the increase in part to movements in the currency market, specifically the lower US dollar index, which has made dollar-denominated gold less expensive and more attractive to buyers using other currencies.

The decline in the dollar index by 0.3% has also reduced expectations of an interest-rate hike in September, with most analysts anticipating that the Federal Reserve will maintain its current rate range of 3.50% to 3.75%. CME's FedWatch Tool showed that markets are assigning a 33% probability to a September rate increase, down from 55% a week earlier.