Gold rebounds on weaker dollar, yield drop
Spot gold was up 1.1% at US$4,149 per ounce, after slipping to a one-week low in the previous session.
On October 15, gold prices surged by more than 1%, potentially ending a three-day losing streak. This uptick was driven by a weaker US dollar and declining yields on US Treasury securities. Despite the release of hotter-than-expected inflation data, the anticipation of a Federal Reserve rate increase in October remained low. The price of spot gold reached US$4,149 per ounce, up 1.1% from the previous session, while US gold futures for December delivery surged 1.5% to US$4,170.10 per ounce.
The dollar declined by 0.4%, and the 10-year Treasury yield hit a three-week low. Peter Grant, a senior metals strategist at Zaner Metals, noted that the market had anticipated a strong producer price index (PPI) report following the higher-than-expected consumer price index (CPI) number. He also mentioned that the Federal Reserve's limitations due to fiscal constraints would make raising interest rates burdensome for the economy.
Higher interest rates typically make non-yielding assets less appealing. In September, US producer prices rose to their highest level in 4 1/2 years, driven by increasing costs for goods and services. The consumer price report on October 14 showed a sharp acceleration in prices due to a surge in gasoline costs. Market predictions for an October Fed rate hike increased following the CPI data, but San Francisco Fed president Mary Daly and vice-chair for supervision Michelle Bowman suggested that an immediate rate hike might not be necessary, dampening expectations of an October rate increase.
Traders now estimate a 29% chance of a rate hike later in October, according to CME’s FedWatch Tool. Investors will also be watching Federal Reserve Chairman Kevin Warsh’s remarks at the International Monetary Fund’s annual meeting for any insights before the Fed's meeting. Other metals, such as silver, platinum, and palladium, also experienced gains, with silver up 2.3% to US$56.90 per ounce, platinum 0.4% to US$1,613.75 per ounce, and palladium 3.2% to US$1,129.20 per ounce.
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