Gold prices recovered on Friday after suffering a sharp decline in the previous session.
A slightly weaker U.S. dollar offered some support to bullion, while investors continued to assess rising oil prices, higher Treasury yields and expectations that the Federal Reserve could raise interest rates next week.
At 01:59 ET, XAU/USD rose around 0.8% to $4,351.28 an ounce. Gold futures, however, slipped roughly 0.4% to $4,391.37.
Silver also moved higher, with XAG/USD gaining 0.8% to $64.10, while platinum rose about 1.1% to $1,801.18.
The U.S. Dollar Index remained broadly unchanged near 99.04.
Gold Recovers After Sharp Sell-Off
Gold remains on course for a third consecutive weekly decline after falling around 1.8% on Thursday.
Spot gold has since recovered toward the $4,350 level, but the broader outlook remains pressured by expectations of tighter U.S. monetary policy.
Markets have become more cautious after recent inflation data strengthened the case for another Federal Reserve rate hike.
U.S. Inflation Data Boosts Fed Rate-Hike Expectations
The latest U.S. Producer Price Index showed prices rising 0.4% in August, marking the strongest monthly increase since May.
The report renewed concerns that higher energy prices could continue feeding into broader inflation.
That is particularly important ahead of the Federal Reserve’s next policy decision.
If inflation remains elevated, policymakers may be more willing to keep interest rates high or tighten monetary policy further.
Higher rates typically create pressure on gold because the precious metal does not generate interest income.
Oil Prices Add to Inflation Concerns
Oil prices have become another key factor influencing the gold market.
Brent crude climbed close to $108 per barrel as tensions between the United States and Iran showed few signs of easing.
The conflict has intensified in recent weeks, raising concerns about possible disruptions to global energy supplies.
Higher oil prices could increase inflationary pressures across the global economy and make central banks more cautious about cutting rates.
Markets are currently pricing roughly a 70% probability of a Federal Reserve rate hike this month.
Treasury Yields Continue to Pressure Gold
Higher U.S. Treasury yields are also creating headwinds for bullion.
When bond yields rise, investors can earn stronger returns from government debt, which can reduce demand for non-yielding assets such as gold.
As a result, gold remains sensitive to changes in both U.S. interest-rate expectations and bond-market movements.
Any further increase in Treasury yields could limit the metal’s short-term recovery.
Gold ETF Demand Remains Strong
Despite the recent weakness in prices, longer-term investment demand for gold remains significant.
According to the World Gold Council, global physically backed gold exchange-traded funds attracted around $18 billion in August.
That represented the second-largest monthly inflow on record.
ETF holdings increased by approximately 121 tonnes to a record 4,189 tonnes, while total assets under management climbed about 16% to $615 billion.
Strong Investment Demand Supports Gold
Heavy ETF demand helped gold post a strong performance in August.
The precious metal gained around 13% during the month, marking one of its strongest monthly returns in decades.
This suggests that institutional and long-term investor demand remains strong despite recent short-term volatility.
Persistent geopolitical uncertainty and inflation concerns may also continue to support gold as a defensive asset.
Gold Technical Outlook Remains Cautious
From a technical perspective, gold still faces important resistance levels.
Tony Sycamore, senior market analyst at IG, noted that gold remains below its 200-day moving average near $4,537.
A recovery above that level could indicate that the correction from the recent $4,697 high is beginning to lose momentum.
Until then, the metal could remain vulnerable to further downside.
Sycamore sees the possibility of a deeper pullback toward the $4,200 area if selling pressure continues.
Gold Traders Focus on Fed Decision
Gold’s next major move could depend heavily on the Federal Reserve’s upcoming policy decision.
A more hawkish Fed could strengthen the dollar and Treasury yields, potentially putting renewed pressure on bullion.
On the other hand, any sign that policymakers are becoming less aggressive could improve sentiment toward precious metals.
For now, gold remains near $4,350, caught between strong long-term investment demand and short-term pressure from higher rates, inflation and rising bond yields.
