Gold turned higher on Thursday as traders scaled back bets on another Federal Reserve rate hike this month, while elevated Treasury yields and a firmer dollar held in the background. The metal is still working off its steepest monthly loss since June, triggered by September's rate increase and climbing bond yields.
Gold turned higher on Thursday as investors weighed reduced expectations for another Federal Reserve interest-rate hike this month against elevated Treasury yields and a firmer dollar. Spot gold rose 0.5% to $4,179.00 an ounce at 09:03 ET, while gold futures gained 0.5% to $4,208.67 an ounce.
The U.S. dollar index climbed 0.3% to 101.79, tracking the greenback against a basket of currency peers. A stronger dollar can dent gold's attractiveness by making the metal more expensive for overseas buyers.
Gold posts worst monthly loss since June
Gold fell 6% in September, its biggest monthly decline since June. The decline followed the Fed's first interest-rate increase since 2023, which came with a signal that additional tightening could still be necessary. Global bond yields also climbed during the month as concerns over rising government debt and fiscal deficits pushed up term premiums. Higher yields increase the opportunity cost of holding gold, which pays no interest.
HSBC analysts wrote in a note that "gold rallied on renewed investor interest in late summer", but the September rate hike, expectations of further increases, and rising oil prices pushed the metal back on the defensive.
Softer inflation data trims rate-hike bets
Still, gold found support as expectations for an imminent Fed interest rate hike this month faded. The central bank's preferred measure of underlying inflation, the personal consumption expenditures price index excluding food and energy, rose 0.2% in August, below expectations, while the previous month's reading was also revised lower.
Traders responded by sharply cutting the odds of a rate increase at the Fed's October meeting. The implied probability fell to around 34%, from almost 70% earlier in the week. At the same time, U.S. consumer spending rose in August at its fastest pace in more than a year, reinforcing expectations that the economy can withstand higher rates and keeping longer-dated Treasury yields near multi-decade highs.
Markets now turn to Friday's U.S. jobs report for further clues on the Fed's rate path and the outlook for bullion.
Source: Commodities & Futures News
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