Gold bears tighten their grip as Fed rate hike bets rise

Gold prices dipped to a one-week low on Thursday amid growing expectations of Federal Reserve rate hikes. The benchmark 10-year US Treasury note yield surged 15.2 basis points, reaching a five-year high of 5.15%. Similarly, shorter-term yields also approached multi-year peaks. Strong U.S. economic data, particularly the S&P Global PMI Composite metric, which hit a five-year high of 58.4 in September, fueled this move.

Analysts now estimate a 75% chance of a rate increase by the end of the year, up from 55% the previous day. This heightened focus on rising borrowing costs is negatively impacting gold, as it makes the precious metal more expensive for international buyers and less appealing compared to interest-bearing assets. The U.S. Dollar Index stood at 101.27, marking its highest level in two months, further pressuring gold sales in overseas markets.

Fed officials have signaled a willingness to continue tightening monetary policy, with New York Fed President John Williams stating, "We need to get inflation back to target in a timely manner," hinting at possible additional rate hikes by year-end. Meanwhile, geopolitical tensions, including ongoing discussions between the U.S. and Iran, continue to influence global market dynamics, with central banks worldwide bolstering their gold reserves, particularly as a hedge against potential currency devaluations and economic uncertainty.