Gold rose on Thursday as a weaker dollar and lower Treasury yields outweighed a hotter-than-expected U.S. inflation report. Bets on a Fed rate increase moderated after Wednesday's sharp initial drop, though the Fed is still seen raising rates at least once more in 2026.
Gold rose on Thursday, buoyed by a weaker dollar and lower U.S. Treasury yields, even though hotter-than-expected inflation data has fueled bets of higher-for-longer interest rates. By 04:41 ET, spot gold had ticked up 1.3% to $4,156.96 an ounce, while gold futures advanced 1.7% to $4,177.90 an ounce.
Inflation report triggers a sharp initial fall
The metal rebounded from a sharp initial fall on Wednesday. An acceleration in monthly U.S. consumer price growth that exceeded estimates sparked the drop, due largely to a climb in energy costs stemming from the Iran war.
After the report, investors raced to increase wagers that the Federal Reserve will lift borrowing costs at its October 27-28 gathering. Treasury yields briefly spiked and the dollar strengthened. Elevated interest rates can weigh on gold by raising the opportunity cost of holding a non-yielding asset, and a firmer dollar makes bullion more expensive for overseas buyers.
Rate-hike bets moderate after the inflation report
Markets now anticipate roughly 30 basis points of hikes over the rest of the year, compared with 25 basis points previously, according to analysts at Vital Knowledge.
Weakness in artificial intelligence stocks spurred traders to shift into the perceived safety of U.S. debt, which cooled the selloff in Treasury yields. By 09:20 ET, the U.S. dollar index was down 0.5% at 102.08.
Still, the Fed is seen raising rates at least one more time in 2026. Chicago Fed President Austan Goolsbee described the latest inflation figures as discouraging and warned that AI-related infrastructure investment could also be contributing to an overheating economy. He added that it remained too early to determine whether rates were high enough to return inflation to the Fed's 2% target.
Rick Kanda of The Gold Bullion Company said gold's performance next year would depend on the resilience of recently strong central-bank demand, the path of interest rates and the dollar, and whether investors keep their appetite for safe-haven assets.
Source: Investing.com
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