Investing.com — Gold prices rose sharply on Friday, climbing to new highs, as continued expectations of interest rate cuts from the Federal Reserve sustained demand for the yellow metal.
At 09:55 ET (13:55 GMT), the price rose 1.5% to $2,493.86 per ounce, while it rose 1.6% to $2,533.10 per ounce.
Both benchmarks are on track for weekly gains of more than 2%.
Gold heads for weekly gains amid interest rate cuts
Soft inflation data released earlier this week fueled increased expectations that the Federal Reserve would cut rates in September, although a month-on-month increase in consumer inflation left traders focused on a 25 basis point cut instead of a cut of 50 basis points.
Stronger-than-expected data also boosted confidence in the US economy, while undermining expectations for a bigger rate cut.
But the prospect of lower interest rates still bodes well for gold, as it lowers the opportunity cost of investing in non-performing assets.
Lingering concerns about an all-out war in the Middle East, between Iran and Israel, also kept demand for gold in play.
Buy gold as a hedge from the Middle East – Alpine Macro
Investors should consider buying gold as geopolitical tensions in the Middle East are likely to escalate in the coming months, according to a recent note from Alpine Macro.
The research firm warns that Iran, feeling pressure to restore deterrence, may soon launch limited attacks on Israel, either directly or through proxies.
They note that while Western, Arab and Russian influences are currently holding Iran back, the situation remains volatile.
Alpine Macro suggests that Israel’s threat to retaliate disproportionately, possibly targeting Iran’s nuclear facilities or oil infrastructure, could be an important factor in deterring Iran from a large-scale attack.
They also argue that there is a “tail risk” that Iran would take an unexpected action, such as declaring itself a nuclear power, which would dramatically change the regional balance of power and pose even more risks.
The note emphasizes that the conflict in the Middle East has a “high probability of escalating in the next six to nine months.”
The copper edge is falling, but Escondida’s attack is delivering weekly gains
Among industrial metals, copper prices fell slightly on Friday but were expected to rise for the first time in six weeks after a strike at the world’s largest copper mine led to a tighter supply outlook.
The benchmark on the London Metal Exchange fell 0.4% to $9,105.50 per tonne, while the index fell 0.7% in one month to $4.1218 per pound. Both contracts rose more than 2% this week, ending five weeks of losses.
Workers at Chile’s Escondida mine, which accounts for 5% of global copper supplies, went on strike this week over disputes over compensation.
Any prolonged disruptions to production in Escondida mean a tighter outlook for global copper supplies, which is expected to support prices.
But bigger gains in copper were held back by lingering concerns about sluggish copper demand, especially after a slew of weak economic data from China’s copper importer.
(Ambar Warrick contributed to this article.)
