Gold Dips as Dollar Strengthens and Treasury Yields Rise

Gold prices retreated slightly on Tuesday, weighed down by a stronger US dollar and higher Treasury yields. However, losses were tempered by the easing of expectations that the Federal Reserve would raise interest rates this month. Spot gold dipped 0.3% to $4,128.83 per ounce by 0400 GMT, while US gold futures remained nearly unchanged at $4,155.90.

The dollar's strength made gold more expensive for investors using other currencies. Meanwhile, the 10- and 30-year Treasury yields reached 24-year highs on Monday, reflecting ongoing negative sentiment in the bond market. Analysts note that while short-term pressures exist, gold's long-term outlook remains favorable, particularly due to geopolitical risks in the Middle East.

Kyle Rodda, a senior financial market analyst at Capital.com, highlighted that the next major catalyst for gold could stem from geopolitical tensions or shifts in US rate expectations. Recent data showing slower job growth in September reduced the likelihood of an October rate hike, though traders still see an 87% chance of a hike in December. Higher interest rates typically make non-yielding assets like gold less attractive.

In other economic news, US services sector activity slowed in September, but strong domestic demand strained supply chains and pushed input prices to their highest level in over four years, suggesting inflation may persist into 2027. Geopolitically, Saudi-backed Yemeni forces made advances against Iran-backed Houthis near the strategic Bab el-Mandeb Strait.

Other precious metals also declined, with spot silver falling 0.6% to $60.69, platinum losing 0.5% to $1,712.20, and palladium easing 0.5% to $1,166.86.