Gold prices climbed early on Friday, with buyers returning after Thursday’s sharp pullback and pushing the metal back toward the US$4,200 level.
The rebound places gold on track to secure a strong weekly gain, despite diminishing expectations for a December interest rate cut from the United States Federal Reserve.
By 4:10 pm AEDT (5:10 am GMT), spot gold was up 0.5% at US$4,191.86 per ounce, below three-week highs of $4,245.
The U.S. dollar continues to consolidate its weekly losses as markets grapple with disrupted economic data releases and fading odds of near-term Fed easing. According to the CME Group FedWatch Tool, traders now price in a 49.6% chance of a quarter-point rate cut at the December meeting, down from 63% a day earlier.
A chorus of cautious commentary from Fed officials has helped temper expectations for additional policy easing.
St. Louis Fed President Alberto Musalem warned on Thursday that there is limited scope to cut rates further without risking an overly accommodative stance.
Cleveland Fed President Beth Hammack reiterated the need to keep policy restrictive to ensure inflation continues to move lower.
The remarks sparked a jump in U.S. Treasury yields, dragging gold 0.6% lower on Thursday as investors took profits following four consecutive days of gains.
Markets also saw some position-squaring as traders awaited clarity on U.S. economic data releases after the record-length government shutdown ended.
On Friday, however, safe-haven demand resurfaced amid a broad global sell-off, offering fresh support to the precious metal.
Uncertainty remains elevated as investors brace for a delayed September jobs report and the possibility that October’s employment and inflation data may never be released.
The lack of visibility into the economic outlook has heightened concerns over the Fed’s next policy steps - and reinforced gold’s appeal as a defensive asset heading into the weekend.
