Gold Slips as Dollar and Treasury Yields Rise
Gold prices edged lower on Tuesday as a stronger U.S. dollar and rising U.S. Treasury yields pressured the precious metal, although losses were limited by declining expectations for a Federal Reserve interest-rate increase in October.
Spot gold slipped around 0.3% to $4,128.83 an ounce by 0400 GMT, while U.S. gold futures were little changed at approximately $4,155.90. The stronger dollar made gold more expensive for investors holding other currencies, adding pressure to prices.
The move came as the U.S. Treasury market continued to weaken. Ten-year and 30-year Treasury yields reached 24-year highs on Monday, keeping attention on rising borrowing costs and concerns surrounding inflation and government debt.
Fed expectations remain central to gold trading
Expectations for an October Federal Reserve rate hike have eased significantly after U.S. employment growth slowed more than expected in September. Payroll figures for the previous two months were also revised lower, reducing expectations that the central bank will tighten policy immediately.
Markets are still pricing in a high probability of a rate increase in December, however. CME FedWatch data showed traders assigning an 87% probability to a December increase.
Higher interest rates can weigh on gold because the precious metal does not generate interest income. When bond yields rise, the opportunity cost of holding gold increases, particularly when investors can earn higher returns from interest-bearing assets.
Middle East remains a potential catalyst
Geopolitical developments are also keeping gold traders focused on the Middle East. Saudi-backed Yemeni government forces have advanced around the Bab el-Mandeb Strait, while Houthi forces have claimed attacks against targets inside Saudi Arabia.
The latest developments could become an important driver for precious metals if regional tensions intensify further.
Other precious metals also moved lower during early trading. Spot silver fell 0.6% to $60.69 an ounce, while platinum declined 0.5% to $1,712.20 and palladium eased 0.5% to $1,166.86.
