Gold Edges Higher as Oil Slips, Dollar Stays Subdued; BOJ in Focus

Gold prices edged higher on Friday, supported by a decline in oil prices and a softer US dollar, as investors tracked geopolitical developments in the Middle East and the direction of global monetary policy.

Spot gold rose 0.2% to $4,346.65 per ounce, while US gold futures slipped 0.3% to $4,385.70.

Oil prices fell 1%, and the dollar remained subdued after pulling back from recent highs. A weaker dollar makes dollar-denominated commodities cheaper for holders of other currencies.

Ahmad Assiri, research strategist at Pepperstone, said the relationship between gold and oil could weaken if crude corrects sharply, easing inflation and rate-hike expectations, or if extreme escalation pushes the world towards recession, or if fiscal recklessness comes to dominate over the rate channel.

The Federal Reserve raised interest rates on Wednesday and signalled more increases in the months ahead. Goldman Sachs maintained its end-2027 gold price forecast at $5,400 despite the Fed move, saying tighter policy is likely to slow bullion's rally but not derail it.

Gold is traditionally seen as a hedge against inflation, though higher rates can weigh on demand by boosting the appeal of yield-bearing assets.

The Bank of England held rates steady on Thursday but warned they might need to rise. The Bank of Japan is expected to lift rates to a 31-year high on Friday and pledge further action to counter inflation risks.

"This high-rates environment, in my view, caps near-term gold upside... However, if rising yields stem from deteriorating fiscal confidence, war-related spending and wider deficits, as opposed to rate expectations, a weaker dollar could accompany higher yields, possibly turning the relationship supportive for gold," Assiri said.

Among other precious metals, spot silver gained 0.7% to $65.61 and was on track for a weekly gain. Platinum rose 1% to $1,785.80, while palladium added 0.2% to $1,294.41.