Gold steadies as easing US bond yields reduce rate hike bets
US Federal Reserve officials signal more time needed to weigh next move on interest rates
[MELBOURNE] Gold held a modest gain as US bond yields softened and US Federal Reserve officials signalled they needed more time to weigh their next move on interest rates, even as a possible escalation in the Middle East kept energy costs elevated.
Bullion traded around US$4,180 an ounce, holding a 0.5 per cent rise from the previous session, but was on track to end the week around 2 per cent lower.
US Treasury yields eased across the curve on Thursday (Oct 1) – with the 10-year retreating from a 24-year high – as concerns over France’s fiscal outlook fuelled demand for safe-haven assets.
Higher yields are typically a headwind for bullion, which does not pay interest, and helped drive its 6 per cent decline in September.
Fed vice-chair Philip Jefferson said more time may be needed to assess whether further interest rate hikes are warranted, lowering bets in the market of an imminent increase.
Traders now see the chances of a rise in October at around 27 per cent, down from 70 per cent earlier in the week.
Oil rose on signs the conflict in the Middle East may worsen, which threatens to hamper a recovery in energy flows from the region.
The Pentagon may deploy an additional aircraft carrier and 10,000 sailors and Marines to the Persian Gulf, a US official said.
This would take the number of carrier strike groups back to the same number as at the outset of the war against Iran in late February.
“Gold’s quiet opening is more of a calm surface hiding the intense cross-currents underneath,” said Hebe Chen, senior market analyst at Vantage Global Markets.
“Softer US inflation, fading expectations for another October Fed hike and the retreat in oil prices are giving bullion some breathing room, but persistently elevated Treasury yields and a firm US dollar remain a heavy ceiling – keeping gold pinned around US$4,100,” she added.
Spot gold rose 0.1 per cent to US$4,182.20 an ounce at 8 am in Singapore. Silver was up 0.3 per cent to US$61.14 an ounce, after gaining 0.9 per cent the day before.
Platinum and palladium edged higher. The Bloomberg Dollar Spot Index, a gauge of the US currency, was steady after a 0.4 per cent increase in the previous session. BLOOMBERG
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Share with us your feedback on BT's products and services
