Gold Prices Hold Steady After 1.6% Gain as Lower Oil Prices Offset Bond Yield Pressure
Gold prices held steady on Wednesday after climbing 1.6% in the previous session, as falling oil prices eased some concerns over energy-driven inflation, while elevated U.S. Treasury yields continued to weigh on bullion.
At 08:36 WIB, XAU/USD was little changed at $4,180.54 per ounce, while Gold Futures rose 0.8% to $4,212.01. XAG/USD slipped 0.2% to $61.37, while XPT/USD gained 0.1% to $1,715.51. The U.S. Dollar Index edged 0.03% higher to 101.41.
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Lower Oil Prices Ease Inflation Pressure Amid Strait of Hormuz Standoff
Oil prices extended their decline as signs emerged that Middle Eastern supply was beginning to recover toward pre-war levels.
Saudi Arabia increased flows through a key pipeline after repairs were completed, helping offset concerns over the ongoing disruption in the Strait of Hormuz, which had pushed fuel prices higher earlier in the week.
Despite the recent decline, Brent crude remains around 70% higher this year as the conflict approaches its eighth month.
The drop in oil prices has eased some pressure on the inflation outlook, although uncertainty surrounding energy supplies remains an important factor for markets as investors assess the Federal Reserve's next policy steps.
Markets will now focus on the Personal Consumption Expenditures (PCE) inflation data due Wednesday, the Federal Reserve's preferred inflation gauge, followed by Friday's nonfarm payrolls report. The data could provide further clues about the future path of U.S. interest rates.
U.S. Treasury Yields Remain a Headwind for Gold
Pressure on gold from the bond market remained elevated. The yield on the longest-dated U.S. Treasury securities rose for a sixth consecutive session on Tuesday, reaching its highest level since 2002 as investors assessed whether persistently high energy costs could force the Federal Reserve to raise interest rates further.
Higher bond yields generally weigh on gold because the precious metal does not generate interest income. Federal Reserve officials have continued to signal that monetary policy may need to remain restrictive even after the central bank raised interest rates in September for the first time since 2023.
New York Fed President John Williams said Tuesday that another interest-rate hike later this year could be appropriate. His comments prompted traders to reduce the implied probability of a rate hike at the Fed's late-October meeting, which will take place shortly before the U.S. midterm elections, from around 70% to approximately 50%.
Williams cited the Middle East conflict and the rapid expansion of artificial intelligence infrastructure as key sources of inflationary pressure. Three other Federal Reserve officials also discussed the possibility of additional rate hikes in separate appearances on Tuesday.
Gold is on track to end September nearly 6% lower, with elevated energy costs contributing to broader pressure on the precious metal.