Gold Holds Near Two-Month Low

Gold prices hovered around $4,120 an ounce on Thursday, remaining close to a two-month low reached on Wednesday, as investors assessed the Federal Reserve’s September meeting minutes for clues on the interest-rate outlook. The dollar held near an 18-month high, while US Treasury yields remained close to their highest level in more than two decades after the minutes showed all 19 policymakers backed September’s rate hike, with most seeing another increase as appropriate before year-end. Markets now see a near 17% chance of a hike in October and an over 85% probability of a December increase, according to the CME FedWatch Tool. Higher interest rates reduce the appeal of non-yielding gold. Meanwhile, geopolitical tensions continued to support some demand for safe-haven assets. The number of vessels transiting the Strait of Hormuz fell to its lowest level in more than two months as fighting in the region escalated, according to shipping data.

Gold traded near $4,100 an ounce on Thursday, remaining close to its lowest level since early August as the latest FOMC minutes pointed to the possibility of another US rate hike this year, while elevated oil prices continued to fuel inflation concerns. Minutes from the Federal Reserve’s September meeting showed that all 19 policymakers supported the September rate increase, with most indicating that another hike would likely be appropriate before year-end. Markets broadly expect the Fed to leave rates unchanged this month, while the probability of a December hike currently stands at around 78%. Meanwhile, oil prices advanced following reports that the Trump administration had asked the Pentagon to prepare strike options against Iran that could be carried out before the midterm elections. Risks to shipping through the Strait of Hormuz also remain elevated, even as oil flows from the Middle East are estimated to have recovered to prewar levels.

Gold prices fell over 1% to the $4,100 per ounce mark on Wednesday, the lowest in over one month, amid pressure from high interest rates. Long-maturity bond yields surged to multi-decade highs among the world's largest credit markets, raising the opportunity cost of holding non-interest-bearing assets and pressuring precious metals. Yields on US Treasuries surged further following strong growth and price data unveiled by ISM PMIs. Reinforcing this, minutes from the Fed's last meeting indicated that the FOMC reached a degree of consensus that more rate hikes are warranted to tame inflation. Meanwhile, the threat of soaring budget deficits in the US, France, and Japan was also responsible for lifting borrowing costs.