Gold inches lower as firmer dollar, higher yields weigh

Gold prices dipped slightly on Tuesday amid a stronger US dollar and higher Treasury yields, although the decline was tempered by expectations of a potential Fed rate hike later this month. The spot price of gold fell by 0.3% to $4,128.69 per ounce, while US gold futures remained relatively unchanged at $4,156.00. The US dollar remained strong, making gold more costly for investors holding foreign currencies.

Meanwhile, 10- and 30-year Treasury yields reached their highest levels in 24 years, reflecting ongoing bond market weakness. Despite the market pressures, the long-term outlook for gold remains supportive. Analyst Kyle Rodda at Capital.com noted that geopolitical tensions in the Middle East, along with potential shifts in US interest rate expectations, could drive the next price move.

The probability of a Federal Reserve rate hike in October was reduced following weaker-than-expected US job growth in September and revised downward numbers for previous months' nonfarm payrolls. However, traders still anticipate an 87% chance of a rate increase in December, according to CME's FedWatch Tool. Elevated interest rates make non-yielding gold less attractive, as the opportunity cost increases.

US services sector activity slowed in September, while strong domestic demand strained supply chains and pushed business input price measures to their highest level in over four years, indicating potential inflationary pressures persisting into 2027. In other metals, silver declined 0.6% to $60.67, platinum dropped 0.7% to $1,710.08, and palladium eased 0.2% to $1,170.15.