Gold surges along with US treasuries as oil price slide deepens
Bullion rose as much as 2.8% to exceed US$4,380 an ounce, snapping a three-day drop
Gold surged nearly 2.8% to surpass $4,380 per ounce, ending a three-day decline, as oil prices plummeted and put a dent in inflation concerns following the U.S. Federal Reserve's initial interest rate hike since 2023. Treasury yields softened after surging in reaction to the Federal Reserve's unanimous decision on September 16 to raise rates by a quarter percentage point.
The rise in Treasuries somewhat relieved some pressure on gold, which typically performs poorly when bond yields are high because it does not pay interest. Strategist Christopher Wong at OCBC remarked that yields were "correcting from the overreaction" in the previous session, which has helped bolster gold prices, although "elevated yields and a stronger US dollar may continue to cap gold in the near term".
The steep drop in oil prices has reinforced predictions of the Federal Reserve's September rate hike, putting downward pressure on gold. While the Fed's rate increase was anticipated, Chairman Kevin Warsh's stance on inflation drove up market expectations for at least one more increase in 2026 and potentially as many as two more in 2027.
The signal from the Fed that interest rates will stay higher for an extended period remains a near-term negative for the yellow metal. Strategist Giovanni Staunovo at UBS Group wrote in a note that "rising fiscal deficits, higher debt burdens, an eventual weakening of the US dollar, and our expectation that the Fed will resume easing next year should support gold despite the near-term volatility".
The price dip towards $4,000 presents opportunities to increase exposure, according to Staunovo. Gold-backed exchange-traded funds (ETFs) have attracted significant inflows for eight consecutive days, with demand for options on some of the largest gold-backed ETFs also being robust. The SPDR Gold Shares, the largest such fund, recently experienced the highest level of outstanding call options since early 2026, indicating heightened volatility as market participants hedge their positions.
Spot gold climbed 1.8% to $4,341.82 an ounce by 4:43 pm in New York, while silver increased 3.5% to $65.21 an ounce. Platinum and palladium also made gains. The Bloomberg Dollar Spot Index remained relatively unchanged.
Written by urgent.news from The Business Times - Companies & Markets's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
