Gold inches higher as dollar softens, investors eye Fed rate outlook

Gold prices ticked higher on Friday, bolstered by a softer U.S. dollar, while investors assessed the trajectory of Federal Reserve interest rates. 

By 09:44 ET (13:44 GMT), spot gold had risen by 0.2% to $4,177.54 an ounce and gold futures had gained 0.6% to $4,196.47 an ounce.

The U.S. dollar index, which tracks the greenback against a basket of global currencies, was last down by 0.3% at 101.75 and was on track for its first weekly decline in five weeks.

A weaker dollar can support gold by making bullion less expensive for overseas buyers.

Also influencing sentiment around the yellow metal are expectations for the Fed’s monetary policy path, particularly the potential for an interest-rate hike before the end of 2026. Elevated borrowing costs can dent the appeal of gold by increasing the opportunity cost of holding non-yielding assets.

On Thursday, Fed Chair Kevin Warsh offered an upbeat assessment of the U.S. economy, saying he was surprised how resilient it has proven to be in the face of tighter monetary policy.

But speaking at an event in Thailand, Warsh also said he had spoken with other central bankers about inflationary pressures. He added that it is "hard to be in a discussion" with these central bankers and "not compare notes and hear the same thing about the surge in prices."

As he has largely done since taking over at the helm of the Fed earlier this year, Warsh did not reveal any specific insight into the central bank’s rate trajectory. Instead, he stressed that he doesn’t "believe in saying now what I might do at the meetings that we have in the balance of this year."

Despite Warsh’s resistance to forward guidance, some of his Fed colleagues have suggested in recent weeks that while further rate hikes may be needed to corral inflation, they are awaiting more data. In September, the Fed lifted borrowing costs by 25 basis points, highlighting a desire to cool price growth back to its 2% level.

Investors are widely betting that the Fed will stand pat on rates at its October 27-28 gathering. Earlier this week, wagers on a potential hike this month briefly increased following hotter-than-anticipated consumer price data, but later dissipated. Instead, rates are tipped to move up by a quarter of a percentage point again at the Fed’s final meeting of the year in December.