Gold prices rose to around $4,110 at the end of the week after the market reduced expectations for a US interest rate hike. The sentiment supported demand for the precious metal.
At 9.25 am, gold prices were at $4,092, down 0.25% since it opened early Friday in Asian trading.
The Federal Reserve (Fed) had previously kept interest rates at 3.50% to 3.75%. However, Fed Chairman Kevin Warsh's statement, which emphasized his commitment to continue lowering inflation, failed to provide a clear indication of the direction of monetary policy going forward.
As a result, the probability of an interest rate hike at the September meeting fell to 63.4%, compared to around 77% before the Fed meeting in July. Lower interest rate expectations have the potential to increase the attractiveness of gold as the metal does not offer interest returns.
However, geopolitical tensions in the Middle East are expected to continue to influence market movements.
Iran has claimed to have targeted US military bases in Kuwait, Jordan and Bahrain in retaliation for the US attack on Qeshm Island, and warned that the Strait of Hormuz would remain closed.
The development has the potential to push up crude oil prices, increasing inflationary pressures and giving central banks a reason to keep interest rates high for longer. This is expected to limit gold's gains in the short term.
