Gold prices reduced earlier gains on Friday as crude oil recovered from session lows and investors continued to assess the outlook for global interest rates.
At 09:47 ET, spot gold was up around 0.4% at $4,356.83 per ounce. Gold futures, meanwhile, slipped 0.1% to $4,394.67 per ounce.
Spot gold has gained roughly 0.9% over the past week. The precious metal rebounded more than 2% on Thursday after falling to a near six-week low a day earlier.
Oil Prices Recover on Saudi Supply Concerns
Brent crude futures erased part of their earlier decline after reports raised fresh concerns about Saudi oil supplies.
Saudi Aramco reportedly told at least two European refining customers that they would receive no crude oil next month following an attack on the kingdom’s main East-West Pipeline.
The pipeline is an important route for transporting Saudi crude toward the Red Sea.
Middle East Tensions Keep Oil Markets on Edge
The latest development comes amid ongoing fighting between Saudi Arabia and Iran-backed Houthi forces in Yemen.
Recent Houthi advances in western Yemen have increased concerns about the security of the Bab el-Mandeb Strait.
The waterway connects the Red Sea with the Gulf of Aden and is one of the most important shipping routes for global energy markets.
Together with the Strait of Hormuz, Bab el-Mandeb plays a critical role in Saudi Arabia’s ability to move crude oil to international buyers.
Saudi Arabia Seeks to Restore Pipeline Flows
Investors are also watching for signs that Saudi Arabia could partially restore operations at its damaged East-West Pipeline.
The pipeline was affected by drone attacks last week and normally carries crude toward Yanbu on the country’s Red Sea coast.
Saudi Arabia is reportedly aiming to restore around half of the pipeline’s capacity within days.
That would represent a faster recovery than earlier estimates, which suggested repairs could take several weeks.
Higher Oil Prices Complicate Gold Outlook
Rising energy prices remain a key concern for financial markets because they can contribute to broader inflation pressures.
Investors fear that persistent energy-driven inflation could encourage central banks to keep monetary policy tighter for longer.
Higher interest rates are generally negative for gold because the metal does not provide interest income.
As bond yields rise, yield-bearing assets can become more attractive compared with non-yielding gold.
Central Banks Continue to Tighten Policy
The Bank of Japan became the latest major central bank to raise interest rates on Friday.
The move followed recent tightening decisions from both the Federal Reserve and the European Central Bank.
The BOJ highlighted concerns that inflation is moving increasingly close to exceeding its 2% annual target.
However, investors remain divided over whether the central bank will continue raising rates over the coming months.
Stronger US Dollar Pressures Gold
Gold also faced pressure from a firmer U.S. dollar.
ING analysts highlighted upside risks for the greenback after the Federal Reserve delivered a hawkish policy message.
The bank said the Fed’s stance has allowed markets to more fully price the possibility of another rate increase in October if economic data and energy prices remain strong.
The U.S. Dollar Index rose around 0.3% to 100.51.
A stronger dollar can weigh on gold because it makes the precious metal more expensive for buyers using other currencies.
For now, gold traders remain focused on oil prices, central bank policy and movements in the U.S. dollar as they assess whether the recent rebound in bullion can continue.
