Gold jumps as dollar weakens on Fed rate-hike uncertainty

Customers look at the display window of a store at the gold market in Dubai, one of the busiest jewellery markets in the Middle East.
Karim Sahib | Afp | Getty Images

Gold prices posted modest gains for the week, rising more than 1% on Friday as the dollar weakened amid reports of a potential debate amongst the U.S. Federal Reserve officials about the pace of rate hikes.

Spot gold was up 1.64% at $1,654.41. U.S. gold futures settled up 1.2% to $1,656.3.

The WSJ reported that Fed officials were barrelling toward another interest-rate rise of 0.75 percentage point in November, while some have begun signaling their desire to slow down the pace of increases soon.

"The Wall Street Journal article which mentions the pace of rate hikes is being given a lot of share of mind for (market)participants," said Daniel Ghali, commodity strategist at TD Securities.

San Francisco Federal Reserve Bank President Mary Daly on Friday said the central bank should avoid putting the U.S. economy into an "unforced downturn" by overtightening, adding that the Fed is nearing a point where it should slow rate hikes.

Gold is sensitive to rising interest rates, which increase the opportunity cost of holding bullion that does not pay interest.

Prices were now up about 0.6% for the week, after rebounding from their lowest level since end-September, touched earlier in the day.

With gold hitting a low, people came in and started buying it, said Michael Matousek, head trader at U.S. Global Investors.

The dollar index gave up earlier gains and slipped 0.6%, making gold less expensive for overseas investors.

On the physical side, demand for gold in India picked up pace this week as some consumers bought into a retreat in domestic prices ahead of festivals.

Elsewhere, spot silver rose 2.7% to $19.16 per ounce, platinum gained 1.9% to $931.00 while palladium fell 2.1% to $2,014.86