Gold rises as dollar fall offsets some pressure from rate hike bets

Gold increased on Friday as the dollar’s retreat temporarily seemed to stave off some pressure on the precious metal from prospects of more interest rate hikes.

Spot gold increased 0.5 percent to $1,716.30 per ounce, after rising to its highest since Aug. 30 earlier in the session.

U.S. gold futures stood at 0.4 percent higher at $1,727.0.

The yellow metal increased 0.3 percent for the week, its first weekly rise in four.

“The U.S. dollar index really dropped sharply overnight and that has supported the gold and silver markets. Also seeing some short-covering in the futures markets heading into the weekend,” senior analyst at Kitco Metals Jim Wyckoff said.

The dollar lowered to a more than one-week low against its rivals, making greenback-priced bullion cheaper for overseas buyers.

Nevertheless, the gold market continues to see a slow and steady reduction of exchange-traded funds (ETFs), and trading volumes on U.S. futures markets continue to weaken, suggesting that the move higher is unlikely to be sustained, according to independent analyst Ross Norman.

“If consumer prices come in hotter than expected, gold might see selling pressure target the $1,680 region and a sharp deceleration with pricing pressures might only provide a modest boost for gold,” senior analyst with OANDA, Edward Moya noted.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

Demand in some Asian hubs remained firm this week among lower prices in the physical gold market.