Gold prices climbed on Thursday following a retreat in the US dollar from an 18-month high, offering some relief after reaching a two-month low in the previous session.
Dollar dip lifts gold
Gold touched its lowest level since 5 August on Wednesday amid a stronger dollar and rising US Treasury yields. The easing of the dollar on Thursday helped gold recover some ground. However, head of research at Pepperstone, Chris Weston, said that a break above $4,275 is necessary to shift the near-term outlook on gold to a more constructive stance.
Weston noted that the short-term investment case for gold remains challenged, describing the current conditions as a seller’s market. He added that if markets start to view rising long-term yields as indicators of sovereign credit and fiscal risk rather than economic strength, gold could begin to perform better against bond yields and the debasement trade may regain momentum.
Fed policy and geopolitical risks
The Federal Reserve’s minutes from its September meeting, released on Wednesday, showed unanimous support among policymakers for a quarter-point rate increase, though reasons differed. Traders price an 18 percent chance of a Fed hike later this month and an 80 percent probability for December, up from 69 percent before the minutes.
Gold’s movement continues against the backdrop of geopolitical tensions in the Middle East, which have influenced oil prices, inflation expectations, and interest rate outlooks. Reports also mention possible renewed US strikes on Iran, adding further complexity to market dynamics affecting gold.
Physical demand and market positioning
The reopening of Shanghai trading after Golden Week is set to test Chinese physical demand for gold. Meanwhile, speculative positions in gold have slightly decreased, with the Commodity Futures Trading Commission showing net long contracts falling by 7,221 to 218,632 in the week ending 29 September.
Gold was valued at $4,134.67 an ounce by our market data as of 03:14 GMT, near a 31-day low. Brent crude closed at $125.44 a barrel on 6 October, reflecting elevated energy prices relevant to inflation expectations connected with gold’s safe-haven appeal.
Source: Federal Reserve | Data: LBMA · FRED — St. Louis Fed · CFTC
