Gold rose Friday as the dollar and oil prices eased, but the metal still ended the week down about 2% after a surge in Treasury yields and firming Fed rate-hike bets. Rising odds of an October rate increase and a bruising bond sell-off have kept pressure on the non-yielding metal.
Gold added 0.3% to $4,285.76/oz at 16:35 ET on Friday, while gold futures gained 0.6% to $4,321.62/oz. A weaker dollar and falling oil prices lifted the metal on the day.
Yet the yellow metal was still set for a weekly loss. Spot prices had fallen 2.1% over the week, while futures were down 2.3%.
Yields surge, Fed hike odds climb
U.S. yields surged this week, and odds of Fed monetary policy tightening increased, putting gold under pressure. The benchmark U.S. 10-year yield scaled its highest level since June 2007 earlier in the week, while the 30-year yield hit its highest since June 2004.
The bond sell-off, especially in longer-term instruments, has rattled precious-metal market participants and also pressured Wall Street. Bond markets had initially cheered the Federal Reserve's interest rate hike last week as proof that the central bank was willing to aggressively combat inflation despite political pressure to ease monetary policy. However, hawkish commentary from policymakers since the hike, along with robust U.S. business activity data, has boosted the odds of a quarter-point rate hike in October, according to the CME FedWatch tool.
Higher rate environments tend to weigh on non-yielding assets such as gold. They also tend to strengthen the dollar, which in turn can make bullion more expensive for foreign buyers. Still, ANZ analysts said investment demand for gold has stayed resilient, with no material liquidation so far, despite increasingly challenging macroeconomic conditions. The near-term direction for gold remains closely tied to oil prices, Treasury yields, and expectations for the Fed's next moves.
Oil eases on report of U.S.-Iran talks
Crude fell on Friday after a media report that the U.S. and Iran were exploring a phased deal to reopen the Strait of Hormuz. Traders focused on the report even though there was no official diplomatic breakthrough between Washington and Iran this week.
Oil prices had swung sharply in recent days. Hopes had grown earlier in the week for diplomatic progress as delegations from both countries attended the United Nations General Assembly in New York, but the mood soured after President Donald Trump and Iranian counterpart Masoud Pezeshkian exchanged fiery speeches at the UN. That rhetoric was overlooked after Trump confirmed on Tuesday that indirect talks between U.S. representatives and the Iranian delegation had taken place on the sidelines of the UN.
U.S. Secretary of State Marco Rubio tempered expectations on Wednesday, saying he wouldn't call the discussions a major breakthrough. According to Investing.com: "a continuation of conversations that have occurred in the past".
Iran's foreign ministry spokesperson Esmaeil Baqaei said Thursday that Tehran had exchanged messages with the U.S. through Qatari mediation, laying out conditions to return to negotiations, including ending the naval blockade and releasing Iran's frozen assets. Separately, U.S. Ambassador to China David Perdue told CNBC on Friday that Washington had warned against any support for Iran, calling such help unacceptable.
Source: Investing.com
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