Oil prices drop and Federal Reserve’s “cooling” rate hikes ease inflation fears, gold regains its footing above the 100-day moving average

According to Jinse Finance APP, as a turbulent week draws to a close, international gold prices have held onto gains, as the first Fed rate hike since 2023 and falling oil prices have helped ease market concerns about inflation.

Data shows that on Friday, spot gold was trading near $4,350 per ounce, after a nearly 2% rise on Thursday erased most of the previous three days’ losses. Following the Fed’s unanimous decision to raise rates by 25 basis points on Wednesday, US Treasury yields briefly surged, before yields across all maturities retreated. This shift eased some of the pressure facing gold. Since gold does not pay interest, it usually underperforms when bond yields are high.

Oil prices fell for the third consecutive day, as supply disruptions in the Middle East seem likely to ease, reducing the pressure of energy costs on inflation. Saudi Arabia has begun restoring a critical pipeline within a few days, and some tankers continue to transit the still-tense Strait of Hormuz.

Thursday’s rebound pushed gold back above the 100-day moving average, a momentum indicator. Even so, gold prices remain almost 20% below levels seen before the Iran war broke out at the end of February.

In recent weeks, investors have flocked to gold, betting that the metal’s long-term drivers will persist. Even as prices dropped, gold ETFs continued to see inflows.

However, remarks by Fed Chair Kevin Walsh regarding inflation have driven up market expectations for at least one more rate hike this year, and possibly up to two more hikes in 2027, posing a potential headwind for gold.

At the time of writing, spot gold is up 0.05% to $4,348 per ounce. Silver is up 0.5% at $65.74 per ounce, after surging 3.6% the previous day. Platinum and palladium are slightly higher. The US Dollar Spot Index, which measures dollar movements, was little changed after falling 0.1% the previous trading day.