Gold edges up

Gold edged up on Friday as Brent crude retreated from above $100 a barrel, while investors assessed developments in the Middle East conflict and their implications for inflation ahead of the US interest rate decision next week.

Spot gold was up 0.1 percent at $4,052.78 per ounce by 4:10 p.m. EDT (2010 GMT), after falling about 2 percent in the previous session.

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Prices were up 0.9 percent for the week so far, supported by dip-buying earlier in the week.

US gold futures for August delivery settled 0.5 percent higher at $4,070.80.

“Gold and silver are carving out a base around $3,950 and $55, respectively, despite relentlessly higher yields,” said Tai Wong, an independent metals trader.

“While a stop-loss move below can’t be ruled out on a sharp war escalation, gold feels ready to move back higher ... A Fed clearly on hold next week would help,” Wong said.

Brent crude oil prices fell over 4 percent, after rising over 7 percent to settle above $100 in the previous session for the first time since May, after Iran-aligned Houthis said they struck two Saudi oil tankers in the Red Sea.

Bullion has fallen about 23 percent since the US-backed war with Iran began in late February, pressured by expectations that war-driven inflation could keep interest rates higher for longer.

While gold is seen as a hedge against inflation, higher rates typically weigh on the non-yielding metal.

Investors now await the US Federal Reserve’s policy meeting outcome next week, when it is largely expected to keep rates unchanged.

Traders are pricing in about an 82 percent chance of a US rate hike in September, according to the CME FedWatch Tool.

“Recent strength in bullion appears driven largely by dip-buying and short covering,” analysts at ING said in a note.

“This follows the sharp correction from record highs earlier this year ... Elevated oil prices and rising yields are likely to cap any recovery, leaving $4,000 as the key near-term level to watch,” ING analysts said.