Gold experienced a volatile week but held gains, trading around $4,350 an ounce. This recovery came after a nearly 2% gain on Thursday, which erased much of the losses from the preceding three sessions. The rise in gold was attributed to lower oil prices and the Federal Reserve's first interest-rate hike since 2023, which together helped temper inflation fears. Treasury yields also declined across maturities following the Fed's unanimous decision to raise rates by a quarter percentage point, alleviating some pressure on gold, which typically struggles when bond yields are higher because it doesn't offer interest.
Bullion was trading around $4,375 an ounce, maintaining a moderate gain from the previous week. This occurred as traders assessed the ongoing risk of inflation and the future trajectory of interest rates following the Fed's unanimous quarter-point rate hike at their September 15-16 meeting. This move was intended to combat inflation that has consistently exceeded the Fed's 2% target for over five years. Investors are now closely monitoring public statements from various Fed policymakers for indications regarding the pace of potential future rate adjustments.
Spot gold prices initially fell to $4,340 per troy ounce before recovering to Friday's London auction price of $4,349. This rebound followed new six-week lows that occurred after a "hawkish" US Fed policy meeting. The dollar index also climbed to its highest level since the end of July, influenced by the recent Fed rate hike and accompanying hawkish comments. However, US Treasury bond prices rallied across the board, pushing down the yield on Washington's 10-year debt below 5.00% per annum, a rate not seen since summer 2007. Despite these factors, analysts like Daniel Hynes of ANZ suggest that gold's inverse relationship with US yields has weakened since 2022, partly because this month's jump in bond yields reflects fiscal deficits and heavier issuance rather than solely a traditional Fed-driven rates narrative.
