Gold Holds Steady at $4,400 as Dollar Weakness Trumps Rising Yields

The price of gold hovered around $4,400 an ounce on Thursday due to a weak US dollar despite rising Treasury yields. Normally, higher yields would pressure bullion as investors can earn more from government debt. However, this week's scenario is different.

Expectations for a Bank of Japan rate increase and the possibility that the Fed stays on hold have pushed the dollar lower against the yen. This currency weakness has provided an important offset for gold, making it cheaper for buyers using other currencies.

Zaner Metals strategist Peter Grant warned that a hotter inflation reading could quickly change this balance by strengthening the dollar and encouraging a more hawkish Fed. Soft data would likely provide further support for bullion.

Markets are assigning roughly a 60% probability to a quarter-point Fed increase next week, leaving gold unusually sensitive to even a modest inflation surprise.