By: Economy Middle East

Gold prices edged higher on Friday and were headed for their strongest weekly performance since January, supported by lower oil prices as investors awaited key U.S. nonfarm payrolls data for fresh signals on the Federal Reserve’s interest rate path.

As of 5:30 GMT, spot gold rose 0.59 percent to $4,265.88 an ounce, after reaching a seven-week high on Thursday. The precious metal was up more than 5 percent for the week. Meanwhile, U.S. gold futures gained 0.59 percent to $4,324.90.

In the UAE, gold rates edged higher, with 24-carat gold rising AED3.5 to AED514 and 22-carat gold gaining AED3.25 to AED476.

In addition, 21-carat gold rose AED3 to AED456.25 and 18-carat gold ticked up AED2.75 to AED391.25.

Meanwhile, 14-carat gold rose AED2 to AED305.

Mideast de-escalation hopes support gold prices

Expectations of a de-escalation in the Middle East pushed inflation expectations lower, helping gold prices break higher from a multi-week consolidation above $4,000. U.S. President Donald Trump said on Thursday that he expected the war with Iran to end soon, while also noting that the U.S. military was facing supply issues with some weapons.

Iranian media reported that Tehran had targeted what it described as “hostile targets” in the Strait of Hormuz and was planning to restrict U.S. and Israeli vessels from passing through the strategic waterway.

The reports came as Iranian officials said an agreement with Oman to reopen shipping routes was nearing completion.

Crude oil prices were also on track to post a weekly decline. Lower energy costs can ease inflationary pressures and reduce expectations that interest rates will remain elevated for longer, supporting demand for gold.

While the precious metal is widely viewed as a hedge against inflation, higher interest rates tend to weigh on gold prices because it does not generate income.

Investors await key nonfarm payrolls report
Gold prices briefly rose above $4,300 on Thursday as optimism over a potential Hormuz agreement boosted demand, but the gains faded as renewed tensions raised concerns that higher energy prices could keep inflation elevated and reinforce the case for tighter Federal Reserve policy.

Meanwhile, the U.S. dollar index remained around the 100 mark, providing little fresh direction for gold prices.

The U.S. Labor Department is due to release its July nonfarm payrolls report at 12:30 GMT, with investors looking for further clues on the Federal Reserve’s interest-rate path.

St. Louis Federal Reserve President Alberto Musalem said policymakers cannot afford to accept persistently elevated inflation while waiting for stronger productivity growth to eventually ease price pressures.

Markets now see a 55 percent probability of a U.S. rate hike in September, down from 63 percent a week earlier, according to the CME FedWatch Tool.

Meanwhile, continued investment demand from China has provided additional support for gold prices. Gold-backed exchange-traded funds in the country have recorded inflows for 14 consecutive sessions, helping underpin prices despite broader macroeconomic headwinds.

Other precious metals

As gold prices rose, the broader precious metals market witnessed mixed movement on Friday. Spot silver rose 1.3 percent to $62.27 an ounce, while platinum gained 0.5 percent to $1,737.25. On the other hand, palladium slipped 0.2 percent to $1,368.37. All three metals were on track to finish the week higher.