Gold prices rebounded over 1% on Thursday, recovering from three consecutive sessions of declines. The rise was driven by a weaker U.S. dollar and lower Treasury yields, even as expectations for a Federal Reserve rate hike in October remained muted despite stronger-than-expected inflation data.
Spot gold climbed 1.3% to $4,156.52 per ounce by 9:30 EDT, while U.S. gold futures for December delivery gained 1.7% to $4,177.80 per ounce. The dollar slipped 0.5%, and the 10-year Treasury yield hit a three-week low. Peter Grant, vice president and senior metals strategist at Zaner Metals, noted that the market had anticipated the hot Producer Price Index (PPI) data following the previous day's higher-than-expected Consumer Price Index (CPI) report.
The market is beginning to recognize that the Federal Reserve may be constrained by fiscal conditions, making significant rate hikes a burden on the economy. Higher interest rates typically reduce the appeal of non-yielding assets like gold. Producer prices surged in September, marking the largest increase in 4-1/2 years, indicating broadening inflation beyond energy costs. This followed Wednesday's CPI report, which showed accelerating prices due to rising gasoline costs.
While the CPI data initially boosted expectations of an October Fed rate hike, comments from San Francisco Fed President Mary Daly and Vice Chair for Supervision Michelle Bowman tempered those prospects. Traders now see a 30% chance of a rate hike this month, according to CME's FedWatch Tool. Investors are also watching for any clues from Fed Chair Kevin Warsh's remarks at the International Monetary Fund's annual meeting later in the day.
Other precious metals also saw gains, with spot silver rising 2.1% to $56.78 per ounce, platinum increasing 0.6% to $1,616.54 per ounce, and palladium climbing 3.4% to $1,131.25 per ounce.