Gold Rises as Oil Drops Below $100 and Yields Ease

Gold prices climbed in early US trading on Tuesday, benefiting from a drop in US Treasury yields and lower oil prices. Spot gold rose 0.15% to $4,145.67 an ounce, while spot silver gained 0.40% to $60.77 an ounce. The decline in oil prices below $100 per barrel helped ease pressure on precious metals, supporting their recent rebound. Rising bond yields and a stronger US dollar had previously contributed to a downturn in gold and silver prices.

The likelihood of an October rate hike has diminished following weaker-than-expected September payrolls, but inflation pressures keep the possibility of one more rate hike this year alive. Markets currently assign a 78% chance that the Federal Reserve will maintain the current rate at its October 28 meeting. Upcoming signals from Fed speakers, the release of meeting minutes on Wednesday, and the preliminary October consumer sentiment reading on Friday will be key factors in determining the next moves for gold and silver.

Geopolitical risks around the Strait of Hormuz persist, even as regional oil exports have returned to pre-Iran war levels. The Group of Seven agreed to release 100 million barrels of crude oil and/or diesel fuel from their reserves, further boosting supply. Saudi Arabia also cut November prices for its Arab Light crude oil for sale into Asia. A fall in oil prices helps reduce near-term inflation pressure, which in turn aids gold as pressure on yields eases.

Positive risk appetite was evident across global stock markets, with the Dow Jones up 237 points or 0.46%. The S&P 500 hit a new all-time high of 7,835.09, and the Nasdaq Composite gained 0.56%. European and Asian stock markets also saw gains, with the Stoxx 600 index rising 0.28% and the Nikkei 225 index up 1.05%. For gold, a breakout above the resistance zone of $4,203.61 to $4,230.51 is needed to lift the metal to the next resistance level at $4,319.61. Conversely, a drop below the support at $4,103.52 would see the price drop to $3,996.06.