Gold prices recover from two-month low as US dollar rally stalls

Gold prices have rebounded from a two-month low on Thursday, October 8, as the US dollar's sharp rise slowed, preventing a further decline in the precious metal. The spot price of gold increased by 0.7% to US$4,141.09 per ounce by 0140 GMT. Earlier in the week, gold prices had plummeted to their lowest level since August 5 due to a stronger dollar and higher yields on US Treasury securities. US gold futures for December delivery also rose by 0.6% to US$4,165.10.

The decline in the greenback makes gold more affordable for investors holding currencies other than the US dollar. However, experts remain cautious about the short-term investment prospects for gold, stating that it would need to surpass US$4,275 to appear more appealing in the near future. Analyst Chris Weston emphasized that markets may start viewing rising long-term yields as a reflection of sovereign credit and fiscal risk rather than stronger economic fundamentals, potentially reversing the current positive trend for gold vis-à-vis bond yields.

This outlook is contingent on the assumption that economic conditions do not deteriorate significantly.

While Fed policymakers were divided over the necessity of raising interest rates earlier this month, the majority believed that a rate hike was warranted to curb the impact of energy and other price shocks. Nonetheless, only an 18% chance of a rate increase this month is being priced in, with an 80% likelihood of a hike in December according to CME's FedWatch tool. Higher interest rates typically reduce the attractiveness of non-yielding assets like gold.

The IMF's managing director, Kristalina Georgieva, highlighted the global economic challenges, including persistently high energy prices, soaring public debt, and risks stemming from the AI investment boom. She called for governments to implement protective fiscal and monetary policy measures. In the broader market, silver steadied at US$60.18, platinum advanced by 2.1% to US$1,665.00, and palladium increased by 1.6% to US$1,142.86.