Four-week losing streak ends for gold

The selling pressure seen in the gold market following the Fed's interest rate hike has given way to a recovery. The decline in oil prices, which eased inflation concerns, and investors closing their short positions provided support for the precious metal.

Spot gold rose 1.2 percent to $4,390.11 per ounce as of 14:14 US time on the final trading day. Testing its highest level since September 11 during the day, gold gained approximately 1 percent on a weekly basis.

US gold futures also finished the day up 0.6 percent at $4,424.90. Thus, the precious metal approached a weekly gain following a four-week losing streak.

DECLINE IN OIL SUPPORTED GOLD

Chris Gaffney, President of World Markets at EverBank, pointed out that oil is a significant determinant of general inflation, stating that the easing in oil prices has reduced concerns regarding inflationary pressure.

According to Gaffney, investors had increased their short positions to take advantage of the decline in gold in anticipation of an interest rate hike in the US. However, the rapid closing of these positions as prices rose strengthened the upward movement in the market.

Brent crude oil prices fell for the third consecutive session as concerns over supply disruptions originating from Saudi Arabia eased. Conversely, the risk of the conflict in the Middle East expanding and the possibility of a supply shock continue to be monitored in the markets.

Although the decline in oil prices limits inflation concerns in the short term, geopolitical risks continue to be a significant element of uncertainty for both energy and precious metal markets.

FED AND DOLLAR PRESSURE CONTINUES

The rise in gold occurred during a week in which the Fed raised interest rates. The US Central Bank raised the policy rate by 25 basis points on Wednesday to the 3.75-4 percent range and signaled that new interest rate hikes could remain on the agenda in the coming months.

According to the CME FedWatch tool, investors are pricing in a 55 percent probability of another interest rate hike at the Fed's next meeting in October. High interest rates can periodically create pressure on gold, which does not offer interest yields.

Although gold is traditionally seen as a hedge against inflation, the appeal of yield-bearing assets such as bonds can increase in a high-interest environment. Therefore, the Fed's monetary policy path is of critical importance for the direction of the precious metal.

Another factor that could limit the rise in gold was the strengthening of the dollar. The dollar's rise to its highest level in over seven weeks makes gold, which is priced in dollars, more expensive for investors using other currencies.

Tightening in global monetary policy was not limited to the US. The Bank of Japan also raised interest rates to their highest level in 31 years and signaled that it could continue to increase borrowing costs.

$4,400 THRESHOLD IS BEING WATCHED

In the technical outlook, the $4,400-$4,440 band stands out. Chris Gaffney stated that gold is testing this resistance zone; if the level is exceeded, room could open up for upward movement in prices.

On the physical demand side, different trends were seen among countries. Gold demand in India remained weak throughout the week; buyers postponed their purchases in anticipation that prices would fall.

In China, premiums remained flat, supported by strong investment demand. This picture showed that investment demand and physical buying appetite in the global gold market can diverge in different regions.

The rise was not limited to gold. Spot silver rose 2.3 percent to $66.70, and platinum rose 2.2 percent to $1,812.50. Palladium also gained 1.5 percent, reaching $1,310.20.

According to data reported by Reuters, all precious metals headed for weekly gains. The focus of the markets remains on oil prices, the interest rate path of central banks, the course of the dollar, and geopolitical risks.