Gold Heads for Weekly Drop

Gold traded around $4,270 an ounce on Friday and was on track to decline more than 2% for the week, pressured by a stronger dollar and surging Treasury yields as expectations grew that the Federal Reserve may need to raise interest rates further to curb inflation. On Thursday, the 10- and 30-year US Treasury yields rose to their highest levels since 2007 and 2004, respectively, while the dollar climbed to a near two-month high. The moves came as stronger-than-expected US economic data and elevated oil prices fueled concerns over persistent inflation and higher interest rates. Markets are currently pricing in roughly a 67% probability of a Fed rate hike in October, following the first increase in three years last week. Meanwhile, oil prices retreated on reports that the US and Iran were considering a phased agreement that could reopen the Strait of Hormuz and lift a US blockade on Iranian ports.

Gold prices edged lower to around $4,280 an ounce on Thursday, moving closer to their lowest level since early August, weighed by expectations that the US Federal Reserve could tighten monetary policy further. Mounting US inflation pressures and signs of a resilient economy appear to be reinforcing expectations of another rate hike, with traders increasing bets on a second consecutive policy tightening in late October. The pressure on gold intensified as the dollar climbed to its strongest level in two months, following data showing that US business activity expanded at its fastest pace in more than five years. Meanwhile, weekly jobless claims fell to a near 60-year low, further highlighting the resilience of the US labor market and strengthening the case for tighter monetary policy. Elsewhere, oil prices continued to rise as diplomatic talks between the US and Iran failed to show any concrete signs of progress, adding to concerns over potential supply disruptions.

Gold held below $4,300 an ounce on Thursday after falling sharply in the previous session, pressured by a stronger dollar and surging Treasury yields. Those moves came as stronger-than-expected US private-sector data heightened inflation concerns and strengthened expectations for further Federal Reserve rate hikes. Several Fed officials have also reiterated support for last week’s rate increase while warning about persistent inflation risks. Markets are now pricing in around a 70% chance of another Fed rate hike in October, up from 55% a day earlier. At the same time, oil prices rebounded as Iranian President Masoud Pezeshkian maintained a firm stance, saying Tehran would not allow freedom of navigation through the Strait of Hormuz while sanctions and a US blockade remain in place. Higher oil prices add to inflationary pressures, reinforcing expectations for a more hawkish interest-rate outlook.