Gold prices came under renewed selling pressure in Wednesday’s trade, with spot prices falling to a two-month low, pressured by rising Treasury yields, which continued to hover at multi-decade highs, while a strengthening US dollar also weighed on the bullion.
Spot gold fell 2.3% to reach an intraday low of $4,066 per ounce, its lowest level since August 5. The US dollar index climbed 0.5%, making greenback-denominated gold more expensive for holders of other currencies, while 10-year US Treasury yields were at an over two-decade high.
The 10-year Treasury yield last traded around 1 basis point higher at 5.282%. Earlier in the session, it reached 5.35%, its highest level since 2002. The 30-year Treasury bond yield also traded just below a 24-year high, at 5.655%.
Investors are demanding greater compensation to hold global bonds as concerns about persistent inflation, government spending, and surging corporate borrowing to finance the artificial intelligence buildout intensify.
That sense of unease is being compounded by France’s fiscal woes, which are threatening to drag the European Central Bank into the kind of face-off with markets it hasn’t seen since the euro area’s debt crisis more than a decade ago.
Americans’ short-term inflation expectations jumped last month, while sentiment toward the labor market improved, according to a Federal Reserve Bank of New York survey. Minutes of the Fed’s September gathering could reveal that many policymakers were deeply worried about underlying price trends.
Fed policy outlook
Markets are largely expecting the Fed to keep interest rates on hold later this month but are still pricing in an 84% chance of a December increase, according to CME’s FedWatch tool.
Kansas City Fed President Jeff Schmid said curbing inflation may require further rate hikes. San Francisco Fed President Mary Daly also said the policy path would depend on whether inflationary pressures continue.
Higher interest rates diminish the attractiveness of non-yielding gold. Meanwhile, oil prices rose on continued Middle East supply risks and a storm heading toward US oil-producing regions.
Investors are also awaiting the release of the FOMC minutes later in the day for further insight into the Fed’s policy outlook, following last month’s 25-basis-point rate hike, the first increase in borrowing costs since 2023.
(With inputs from Reuters and Bloomberg)
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