Gold hits one-week high: Here’s what’s driving the rise

Gold prices reportedly continued to rise on Friday reaching their highest level in about a week, oil prices fell as crude market sentiment shifted while investors closely monitored developments in the Middle East.

According to current reports, spot gold was up 0.9% at $4,378.19 an ounce by 0829 GMT, while US gold futures rose 0.4% to $4,418.20. Oil prices dropped for a third straight session as easing Saudi supply anxieties concerns market nervousness about a widening Middle East conflict.

Gold is viewed as inflation-hedged though higher rates can cease its appeal by increasing the allure of yielding assets. The US Federal Reserve increased rates on Wednesday and projected more hikes in the coming months. According to Goldman Sachs, borrowing costs are expected to be felt mainly through a gradual near-term growth trajectory rather than a lower terminal gold price.

In this connection, chief market analyst at Bybit, Han Tan said: “The precious metal appears to have taken the Fed's hawkish signals ​in stride, instead finding immediate relief from falling oil prices amid hopes that the ​Fed's hiking cycle will prove shallow.”

The Bank of Japan reportedly increased rates to a 31-year high and indicated its willingness to continue raising interest rates joining other major central banks in combating entrenched inflationary pressures.

A climate and commodities economist at Capital Economics, Hamad Hussain said: “ The state of the conflict in the Middle East will be a key ​factor influencing gold prices. If the conflict prolongs and oil ​prices remain ⁠high well into next year, that could prompt central banks to raise rates more than investors..”

Furthermore, spot silver prices rose to $66.92 platinum gained 2.5% to $1,813.70 and palladium added 2.6% at $1,324.12; moreover all metals were poised for a weekly gain.