Global financial markets closed a volatile week with central bank policy at the center, as gold pushed higher, oil retreated from midweek spikes, and equities posted their first weekly gain in three weeks. Spot gold climbed 1.0% to $4,385.76 an ounce on Friday, putting it on track for a weekly gain of about 0.9%. Gold futures added 0.6% to $4,425.20 an ounce, while New York gold futures were up 0.8% at $4,434.90 in early European trade.
The precious metal had bounced more than 2% on Thursday after hitting a near six-week low a day earlier. Analysts at ANZ noted that gold-backed exchange traded fund holdings have increased for eight consecutive sessions, with strong demand for options on major gold funds. Saxo Bank analysts said gold's resilience is notable because the Federal Reserve has just started a new hiking cycle and the dollar remains relatively firm.
Oil prices fell for a third straight day after Saudi Arabia said it expected to restore flows through a key pipeline within days. China also stepped up diplomatic efforts aimed at limiting the influence of Houthi militants, who have tightened their grip on the Bab el-Mandeb Strait. Brent crude pulled back about 1.5% on Friday but remained nearly 15% higher on the week, hovering near $104 a barrel. Earlier in the week, a targeted attack on Saudi Arabia's East-West pipeline threatened up to 4% of global oil supply, and fresh Houthi strikes in the Red Sea had pushed Brent past $113 a barrel.
Central bank decisions dominated the macroeconomic backdrop. The Federal Reserve voted unanimously to raise interest rates by 25 basis points to a range of 3.75% to 4.00%, its first hike since mid-2023. Fed Chair Kevin Warsh indicated the central bank would keep fighting inflation even under political pressure. The Federal Reserve now projects another hike this year, followed by one cut by the end of 2028. The Bank of Japan also raised rates to a 31-year high on Friday, though two policymakers voted against the move. The Bank of England held rates at 3.75% in a 6-3 vote but warned that persistent energy cost pressures could push it to raise rates to 4.00% at its November meeting.
European stocks slipped on Friday but still closed the week higher. The Stoxx Europe 600 fell around 0.44%, while Germany's DAX and France's CAC 40 each dropped about 0.7% and London's FTSE 100 fell 0.6%. Despite the dip, the Stoxx 600 was set to close the week up around 0.5%, its first weekly gain in three weeks. Tech stocks outperformed, with ASML Holding gaining 2.1% and STMicroelectronics rising 2.2%, while energy, telecoms, and luxury goods lagged.
The combination of elevated bond yields, a firm dollar, and central banks signaling further tightening could keep risk sentiment cautious. For cryptocurrency markets, the macro backdrop may reinforce headwinds as higher interest rates raise the opportunity cost of holding non-yielding assets and a stronger dollar can pressure digital asset valuations.
