Gold hits one-week high as falling oil eases rate fears

Gold rose to a one-week high on Friday, September 18, posting its first weekly gain in four weeks, as a three-day slide in oil prices eased inflation concerns that had dogged the precious metal since the Federal Reserve raised interest rates earlier in the week.

Spot gold climbed as much as 1.1% to around $4,388 per ounce, recovering nearly $150 from a near six-week low of $4,235 hit on Wednesday after the Fed's 25-basis-point rate hike, according to Reuters. The move higher came as Brent crude fell for a third straight session, with easing concerns over Saudi supply disruptions outweighing anxiety about a wider Middle East conflict.reuters+1

"The precious metal appears to have taken the Fed's hawkish signals in stride, instead finding immediate relief from falling oil prices amid hopes that the Fed's hiking cycle will prove shallow," said Han Tan, chief market analyst at Bybit.reuters

Fed Hike Fails to Derail Gold

The Fed on Wednesday raised its target range to 3.75%–4.00%, its first rate increase since 2023, and signaled more hikes could follow, with 16 of 18 policymakers projecting at least one more quarter-point increase by year-end. Chair Kevin Warsh's rhetoric on inflation drove up market-implied expectations, with CME Group's FedWatch tool showing traders assigning roughly 51% probability to another hike in October.investinglive+1

Goldman Sachs The Goldman Sachs Group, Inc. ↗ 4.67% maintained its end-2027 gold forecast at $5,400 per ounce, saying tighter monetary policy would slow bullion's rally rather than reverse it. UBS ↗ 2.47% struck a similar tone, arguing that rising fiscal deficits, higher debt burdens, and an eventual weakening of the U.S. dollar should support gold despite near-term volatility, calling pullbacks toward $4,000 "opportunities to add exposure".businesstimes+2

Oil Retreat and Central Bank Moves

Oil prices have fallen sharply from above $107 a barrel earlier in the week to around $98 on Friday morning, as hopes grew that Saudi Arabia could partially restore flows through its damaged East-West pipeline within days. The pipeline, which transports crude to Yanbu on Saudi Arabia's Red Sea coast, was damaged in drone attacks the previous week amid fighting between Saudi Arabia and Yemen's Iran-backed Houthis.finance.yahoo+1

The Bank of Japan also raised interest rates on Friday to a 31-year high, joining a global tightening wave, while the Bank of England held rates steady on Thursday but warned they might need to rise. Société Générale said it remains bullish on gold heading into the fourth quarter, forecasting prices at $4,750 by year-end and $5,000 by mid-2027, arguing that central banks are unlikely to get ahead of the inflation curve.kitco+2

Broader Precious Metals Rally

Silver, platinum, and palladium all gained alongside gold. Spot silver rose more than 3% to around $67 an ounce, while gold-backed ETF holdings recorded inflows for an eighth consecutive day, taking global holdings to 100.39 million ounces. Hamad Hussain, a commodities economist at Capital Economics, cautioned that if the Middle East conflict prolongs and oil prices remain elevated, central banks could raise rates more than investors expect, putting downward pressure on gold.money.rediff+1