(Bloomberg) — Gold rallied, bolstered by lower US Treasury yields as investors sought safety in bonds following an equity selloff.
Bullion rose as much as 1.4% to trade above $4,150 an ounce, recouping nearly all of the previous session’s losses, while silver also gained. Treasury yields, which spiked Wednesday on data showing US consumer prices rose the most since April, largely reversed the move Thursday as a tech-driven stocks rout spurred haven demand.
Gold’s rise was supported by bond yields “on a rollercoaster,” reversing the earlier surge entirely, said Christopher Wong, a strategist from Oversea-Chinese Banking Corp.
Still, headwinds remain in play for the precious metal. Traders increased bets on Wednesday that the hotter-than-expected inflation data may push the Federal Reserve to raise interest rates again later this month. Higher borrowing costs are bearish for gold, which doesn’t yield interest.
Gold has dropped by more than a fifth since the start of the US-Iran war in late February, which roiled energy supplies, triggering global inflation and monetary tightening. Wednesday’s increase in headline CPI was driven in large part by surging fuel costs, while underlying price pressures also rose.
Federal Reserve Bank of Chicago President Austan Goolsbee said the data was “discouraging,” and warned the buildout of infrastructure related to artificial intelligence may also be overheating the economy. He added it’s still too soon to know whether interest rates are high enough at this point to deliver on the central bank’s 2% inflation goal.
Investors will track final clues on monetary policy from Fed Chairman Kevin Warsh before the central bank begins a media black-out on Saturday ahead of the Oct. 27-28 meeting. He is due to speak late Thursday New York time at the International Monetary Fund meetings in Bangkok.
Spot gold was 1.3% higher at $4,156.81 an ounce as of 11:11 a.m. London time. Silver rose 2.1% to $56.74, while platinum and palladium also advanced. The Bloomberg Dollar Spot Index, a gauge of the US currency, was 0.3% lower.
–With assistance from Jack Ryan.
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