Spot gold rose 1.6% to $4,198.99 by 3:13 p.m. EDT. The metal fell to a two-month low on Wednesday as a stronger dollar and rising US Treasury yields weighed on the non-yielding metal.
US gold futures for December delivery settled up 1.43% at $4,216.3 per ounce. It also closed up 1.3% on the week.
Bullion gained due to “bargain hunting at the lows, as a floor has been building in the $4,000 region,” said Rhona O’Connell, head of market analysis at Stone X.
“It is arguable that a further Fed hike is already priced in but so is the expectation for continued official sector net purchases. Without any Black Swan event I find it hard to see gold breaking convincingly higher.”
US 10-year Treasury yields were off over two-decade highs hit on Wednesday.
St. Louis Fed President Alberto Musalem said on Thursday the US central bank will need to hike rates again to bring inflation back to its 2% target.
Traders are pricing in a 19% chance of a rate hike in October and an 84% probability of at least one 25-basis-point increase by December, according to the CME’s FedWatch tool.
Gold tends to lose its appeal compared to yield-bearing assets in a high interest-rate environment.
“The coming week’s CPI release may act as a catalyst for gold’s next big move... Still-stubborn inflation that pushes the Fed into a steeper rate-hike cycle may force spot gold to re-test the psychological $4,000 support once more,” said Han Tan, chief market analyst at Bybit.
Meanwhile, gold demand in India was sluggish this week as prices rebounded, while trading in top consumer China was subdued during the holiday-truncated trading period.
Among other metals, spot silver gained 2.7% to $60.93 per ounce.