Gold Inches Higher as Fed Rate Hike Bets Ease
Gold prices saw a modest increase on Tuesday, supported by fading expectations of a Federal Reserve interest-rate hike in October. This shift in sentiment helped offset the impact of a stronger US dollar and higher US Treasury yields. Spot gold climbed 0.3% to $4,152.04 per ounce, while US gold futures for December delivery rose 0.56% to $4,180.00 per ounce.
According to Ole Hansen, head of commodity strategy at Saxo Bank, gold is trading near a key support level just above $4,100. He noted that macroeconomic challenges, including rising real yields and a stronger dollar, continue to dampen investor interest in the metal. The US dollar maintained its gains from Monday, making gold more expensive for investors holding other currencies. Meanwhile, US 10-year and 30-year Treasury yields reached fresh 24-year highs on Monday.
The market has reduced its bets on a Fed rate hike this month following softer-than-expected job growth in September and downward revisions to previous payrolls data. Traders now see only a 21% chance of a rate increase in October, but they still anticipate a nearly 70% probability of a hike in December, according to CME's FedWatch Tool. Higher interest rates typically increase the opportunity cost of holding gold, which does not offer a yield.
With limited US economic data expected this week, market focus is likely to 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 in parts of the euro zone, particularly in France. Meanwhile, oil prices fell as supply concerns eased due to resilient Middle Eastern crude exports and a G7 emergency stockpile release.