Gold Remains Under Pressure on Fed Hike Bets

Gold traded around $4,280 an ounce on Friday, down more than 1% for the week, as elevated US Treasury yields and growing expectations of further Federal Reserve rate hikes weighed on the metal. Traders are pricing in a nearly 70% chance of a rate hike in October and a 95% probability of another increase in December, according to the CME FedWatch Tool, as inflationary pressures remain elevated and economic data continues to signal resilience in the US economy. The pressure on gold persisted despite a decline in oil prices on Friday, after US and Iranian negotiators in New York reportedly explored a deal that could see Tehran reopen the Strait of Hormuz in exchange for Washington easing its economic blockade of Iran. Meanwhile, gold demand in India picked up modestly as lower prices attracted buyers ahead of the festive season.

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.