Gold Dips as Dollar Strength and Rising Yields Weigh on Prices

Gold prices dipped slightly on Tuesday, facing pressure from a stronger U.S. dollar and higher Treasury yields. However, losses were tempered by easing expectations of a Federal Reserve interest rate hike in October. Spot gold rose 0.3% to $4,152.04 per ounce, while U.S. gold futures for December delivery increased 0.56% to $4,180.00 per ounce.

Ole Hansen, head of commodity strategy at Saxo Bank, noted that gold trades near key support just above $4,100, with macroeconomic headwinds from rising real yields and dollar strength continuing to weigh on investor appetite. The U.S. dollar maintained its gains from Monday, making gold more expensive for holders of other currencies. Meanwhile, U.S. 10-year and 30-year Treasury yields hit fresh 24-year highs.

Markets have reduced their bets for a Fed rate hike this month following softer-than-expected job growth in September and revisions to payrolls data for the previous two months. Traders now see only a 21% chance of a rate hike in October but still expect a nearly 70% probability of an increase in December, according to CME's FedWatch Tool. Higher rates increase the opportunity cost of holding non-yielding gold.

Hansen added that with limited U.S. economic data due this week, market focus will likely remain on the dollar, yields, and ongoing political and fiscal turmoil in the euro zone. Investors are also concerned about rising government debt levels and widening budget deficits across parts of the euro zone, particularly in France, pushing sovereign bond yields higher.