Gold prices inched up on Friday as North Korea’s latest missile launch over Japan triggered safe-haven buying, but gains were limited as strong US inflation data raised the spectre of another interest rate hike.
Spot gold edged up 0.1% to $1,330.79 an ounce by 8.51am, after dropping to its lowest since 3 August at $1,315.71 in the previous session. The metal was, however, down 1% for the week, and on track to mark its first weekly decline in four. US gold futures for December delivery gained 0.4% to $1,334.80 an ounce.
North Korea fired a missile on Friday that flew over Japan’s northern island of Hokkaido far out into the Pacific Ocean, South Korean and Japanese officials said, further ratcheting up tensions after Pyongyang’s recent test of a powerful nuclear bomb.
Geopolitical risks can boost demand for safe haven assets such as gold and the Japanese yen. The yen held steady against the dollar on Friday, after earlier having risen on the news, with further losses for the greenback capped after strong US consumer inflation data.
“There are a couple of issues pushing and pulling at the market. The reaction to the missile launch this morning has been a bit negated by that better-than-expected inflation number we saw out of the US overnight,” ANZ analyst Daniel Hynes said. “I think the market is increasingly focusing on the Federal Reserve and its probability of another rate hike this year.”
The Fed has a 2% inflation target, and a series of subdued inflation readings have dampened expectations for further rate rises in the near term. Firming inflation could support the case for another rate hike. Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.
The Fed’s next monetary policy meeting is due to begin on 19 September.
Signals for spot gold turned neutral again, as it came back into a narrow range of $1,321-$1,335 per ounce, said Reuters technical analyst Wang Tao.
Silver was up 0.3% to $17.80 an ounce, after touching its lowest since Sept. 1 in the previous session. Platinum rose 0.2% to $980.05 an ounce, and was pulling away from its lowest since late August, hit in the previous session. Palladium gained 0.2% to $924.50, after marking a four-week low on Thursday.