Gold prices closed the week higher as weaker-than-expected U.S. economic data reduced expectations that the Federal Reserve will raise interest rates in the near term.
Gold Gains on Weaker U.S. Data
Spot gold rose 0.5% on Friday to $4,374 per ounce, while U.S. gold futures gained 0.2% to $4,430. Both spot and futures prices ended the week up 0.7%.
The main driver was a series of weaker-than-expected U.S. economic indicators, particularly retail sales and consumer confidence. The data increased concerns about a slowdown in consumer spending and weakened expectations for further monetary tightening by the Fed.
U.S. Retail Sales Fall 0.6%
U.S. retail sales fell 0.6% month-on-month in July, marking the biggest decline in more than a year. Economists had expected sales to increase by 0.1%.
Core retail sales, excluding automobiles, also disappointed, declining 0.3% compared with expectations for a 0.2% increase.
The figures suggest that U.S. consumers lost some momentum after a strong first half of 2026. Analysts have also pointed to factors such as unusually large tax refunds earlier in the year and a decline in the personal savings rate as potential risks to the consumer spending outlook.
Fed Rate-Hike Expectations Decline
The weaker economic data significantly changed market expectations for the Fed’s September meeting.
According to CME FedWatch, the probability of the Fed keeping interest rates unchanged in September rose from 56% to 67% over the course of a week. Meanwhile, the probability of a 25-basis-point rate hike fell from 44% to 33%.
Because gold does not generate interest income, expectations of lower or unchanged interest rates tend to make the precious metal more attractive to investors.
Consumer Confidence Also Weakens
The University of Michigan’s consumer sentiment index fell to 51 in August from 55.2, ending a two-month upward trend.
At the same time, consumers’ one-year inflation expectations increased slightly, from 4.2% to 4.3%.
The combination of weaker consumer activity and still-elevated inflation expectations presents a challenging picture for the Fed as it assesses its next policy move.
Oil Prices Limit Gold’s Gains
Despite the support from changing Fed expectations, rising oil prices amid tensions in the Middle East limited gold’s weekly gains. Higher energy prices could contribute to renewed inflationary pressure, potentially complicating the Fed’s policy outlook.
Market takeaway: Weaker U.S. retail sales and softer inflation signals have reduced expectations for a near-term Fed rate hike, providing support for gold. However, elevated oil prices and persistent inflation expectations remain key risks for the precious metal’s outlook.
Source: Patronlar Dünyası/ Prepared by: İlayda Gök