Gold held near recent lows on Friday after a steep single-session decline, with investors weighing hotter U.S. inflation data, a rally in crude oil and higher Treasury yields ahead of the Federal Reserve's September 14 to 15 meeting.
At 20:37 ET (00:37 GMT), XAU/USD rose 0.1% to $4,322.69 an ounce, while Gold Futures fell 1% to $4,362.87. Silver (XAG/USD) was little changed at $63.57 an ounce and platinum (XPT/USD) also traded flat. The U.S. Dollar Index was little changed at 99.07.
The metal is on track for a third straight weekly decline after sliding 1.8% on Thursday, its largest daily fall in recent weeks. The renewed selling pressure followed U.S. producer price data showing the index increased 0.4% in August, the strongest monthly rise since May. That uptick in wholesale inflation, combined with stronger energy prices, fed market expectations that the Fed will maintain restrictive policy - and possibly raise rates - at its upcoming meeting.
Oil has been a key factor in the inflation picture. Brent crude climbed toward $108 a barrel as tensions in the Middle East persisted and showed little sign of abating. Recent developments include U.S. strikes on Iranian oil tankers, Iranian missile launches at a Jordanian airbase and attacks on Saudi infrastructure carried out by Tehran-backed Houthi forces in Yemen. Continued disruption to energy supplies is widely seen as a channel that could lift broader inflation and influence Fed policy decisions.
Markets are pricing roughly a 70% chance of a Federal Reserve rate increase this month, reflecting how the PPI print and higher energy costs have shifted expectations for the path of policy. Rising Treasury yields added to the pressure on gold, which typically competes with interest-bearing assets for investor attention.
ETF flows and longer-term demand
Despite the near-term headwinds, physical demand for gold via exchange-traded funds remains strong. The World Gold Council reported that globally physically backed gold ETFs drew $18 billion in inflows during August, the group's second-largest monthly intake on record. Holdings rose by 121 tonnes to a record 4,189 tonnes, and assets under management climbed 16% to $615 billion.
Those flows helped lift gold by 13% in August, which the World Gold Council described as the metal's third strongest monthly return in a quarter century. Such significant investment demand provides a structural source of support even as short-term macro drivers push prices lower.
Technical outlook
Tony Sycamore, senior market analyst at IG, noted that gold remains well below the 200-day moving average near $4,537. He said the metal needs to reclaim that level to indicate that the pullback from the $4,697 high has ended. Until that occurs, Sycamore sees room for a deeper slide toward $4,200.
The interplay between technical resistance, stronger wholesale inflation and an oil market affected by geopolitical disruption will likely determine near-term direction. While ETF accumulation underpins longer-term demand, rising yields and a firmer dollar can continue to weigh on prices in the days around the Fed meeting.
Bottom line
Gold's immediate outlook is balanced between competing forces: persistent physical inflows and record ETF holdings versus a hotter PPI reading, higher oil and rising Treasury yields that lift the odds of Fed tightening. Investors and traders will be closely focused on the Fed decision and any subsequent shifts in yields and energy markets that could change the balance of risks.