Gold Edges Up as Softer Oil Tempers Inflation Fears
Gold edged higher in early Asian trading on Monday as softer oil prices eased some of the inflation concerns weighing on the metal, though expectations of another United States interest rate rise in December kept the gains modest.
Spot gold was up 0.2 percent at $4,073.59 an ounce by 0015 GMT, according to Reuters, building on a weekly gain of roughly 5 percent. The rise came as oil prices stayed subdued after President Donald Trump said he was highly unlikely to order fresh strikes on Iran while talks continued, a stance that has taken some of the heat out of energy markets. Brent crude settled at $98.32 a barrel on Friday after falling sharply over the week.
Fed hike bets cap the rally
The metal's advance was held back by a firmer view that the Federal Reserve will raise rates again in December. A robust United States jobs report on Friday showed the economy added 165,000 jobs in October, according to the Bureau of Labor Statistics, while the unemployment rate fell to 4.1 percent from 4.2 percent in September.
Traders now see around an 80 percent chance of a December rate increase, up from about 70 percent before the payrolls release, according to the CME FedWatch tool. Higher interest rates raise the opportunity cost of holding gold, which pays no yield, and that expectation has limited how far the metal can climb even as other forces support it.
A strong week, and a test ahead
Gold posted its best week since August last week, rebounding from a one-year low near $3,870 set on 30 October. United States gold futures for December delivery settled at $4,074.90 an ounce on Friday, and the metal has held above the $4,000 level despite the hawkish shift in rate expectations after the jobs data.
The balance for gold this week is likely to hinge on Tuesday's October consumer price report, the next major test of the case for a December rate rise. A softer reading could ease hike expectations and give gold room to extend its recovery, while a firm one would reinforce the view that the Federal Reserve will keep rates higher for longer.
