Gold Finds Support as Oil Prices Decline

Gold traded near $4,200 an ounce on Wednesday after recovering in the previous session, with falling oil prices offering some support despite continued pressure from elevated Treasury yields. Oil prices dropped sharply amid signs of improving energy flows from the Middle East and following another major release of emergency reserves in the US. Meanwhile, precious metals remain under pressure from rising Treasury yields, with the 30-year US bond yield climbing as high as 5.62%, reaching levels not seen since June 2002. Concerns over persistent energy-driven inflation, along with hawkish remarks from Federal Reserve officials, helped push yields higher. New York Fed President John Williams said Tuesday that another rate increase “late this year” could be appropriate, while noting that the Middle East conflict and the expansion of artificial intelligence remain key drivers of elevated inflation. Gold is on track to decline nearly 6% in September.

Gold prices climbed back above $4,150 an ounce on Tuesday after falling to a more than seven-week low in the previous session, as investors awaited fresh US economic data for clues on the Federal Reserve’s interest-rate outlook. Bullion plunged nearly 4% on Monday as a surge in crude oil prices, driven by lingering concerns over potential disruptions to Middle East supplies, strengthened expectations that the Fed could raise interest rates. Higher oil prices can intensify inflationary pressures, potentially prompting central banks to keep borrowing costs elevated for longer and weighing on non-yielding assets such as gold. Markets are currently pricing in a nearly 70% chance of a Fed rate hike as early as October and a 95% probability of an increase in December, according to the CME FedWatch Tool. Focus now turns to Wednesday’s ADP jobs report, PCE inflation data and comments from Fed officials for further signals on monetary policy.

Gold traded near $4,100 an ounce on Tuesday after plunging 4% in the previous session, as persistent uncertainty over US-Iran negotiations kept oil prices elevated and increased pressure on the Federal Reserve to tighten policy further to curb inflation. Oil prices resumed their advance as Iranian officials reportedly expressed doubt about reaching a deal before US midterm elections in November, following President Donald Trump’s rejection of Tehran’s latest proposal. Treasury yields climbed to fresh multi-year highs amid growing inflation concerns and expectations of further rate hikes, weighing on non-yielding assets such as gold. Markets are now pricing in roughly a 70% probability of a Fed rate increase in October, following the central bank’s first rate hike in three years earlier this month. Attention now shifts to this week’s US economic data, including Wednesday’s PCE inflation report and Friday’s nonfarm payrolls figures, for further clues on the policy outlook.