Gold Retreats as Inflation Concerns Revive Amid Higher Oil Prices
Gold prices retreated on Thursday as investors took profits from the previous day's sharp gains and inflation concerns returned to the forefront. Spot gold fell 0.3% to $4,509.91 per ounce by 12:15 p.m. EDT (1615 GMT), pulling back from its highest level since June 2.
The metal had jumped over 4% on Wednesday after the Treasury announced it would increase buybacks of longer-dated bonds, causing a sharp drop in bond yields and the U.S. dollar. However, the somewhat hawkish tone of the latest Federal Reserve minutes and higher oil prices revived inflation concerns, which undermined gold.
Treasury Secretary Scott Bessent's statement that the government might increase repurchase of Treasury bonds, potentially exceeding $4 billion per issue, provided some relief to gold markets. Nevertheless, analysts noted that higher interest rates can reduce demand for gold by increasing its opportunity cost as a non-yielding asset.
Morgan Stanley analysts predicted that with the U.S. Fed likely to remain on hold in September, there is scope for gold to exceed $5,000/oz in 2027, but also acknowledged the potential for volatility.