Gold prices saw a modest rebound from a one-week low on Wednesday as U.S. Treasury yields and the dollar eased from their recent highs. Nevertheless, the prospect of sustained high interest rates tempered further gains in the precious metal.
At 0603 GMT, spot gold gained 0.1%, reaching $1,927.59 per ounce, after touching its lowest point since August 29 earlier in the session. U.S. gold futures, which initially faced losses, stabilized at $1,952.90.
The U.S. dollar declined by 0.2% after reaching a nearly six-month peak on Tuesday, while 10-year bond yields receded from more than one-week highs as markets digested signals regarding interest rates.
Federal Reserve Governor Christopher Waller noted that recent economic data provided the central bank with space to assess whether further interest rate hikes were necessary.
“Fed‘s guidance for policymaking to be on a meeting-by-meeting basis has kept bets of additional tightening in November/December alive,” explained Yeap Jun Rong, a market strategist at IG.
Furthermore, the surge in oil prices failed to reassure investors regarding the global inflation outlook. This has reinforced the belief in a prolonged period of high interest rates. Yeap Jun Rong added that the upcoming U.S. Consumer Price Index (CPI) data scheduled for next week would play a significant role in shaping the Fed’s rate outlook for the coming months.
According to CME’s FedWatch tool, markets have currently priced in a 93% likelihood of a Fed pause in September. However, there remains an approximately 40% chance of a rate hike in either November or December.
Higher U.S. interest rates and Treasury yields tend to increase the opportunity cost of holding gold, which does not generate any interest income.
Matt Simpson, a senior analyst at City Index, noted that gold’s 200-day moving average, situated around $1,920 per ounce, could potentially provide support in the short term, unless yields experience a significant surge.
In other precious metals, spot silver recorded a 0.2% gain, reaching $23.56 per ounce. Platinum saw a marginal dip of 0.3%, resting at $923.79, while palladium advanced by 0.4% to $1,217.21.
