Spot Gold Stays Weak Near $4,290 as Oil Rally, Fed Rate-Hike Fears Weigh
Summary
- International gold prices remained under pressure as rising oil prices and concern over additional rate hikes driven by solid U.S. economic data weighed on the metal.
- U.S. Treasury yields climbed to their highest levels in about 20 years, with the five-year Treasury yield rising above 5% for the first time since 2007.
- Fed officials are also making the case for further tightening, while interest-rate swap markets are pricing in at least three more rate hikes by April next year.
Forecast Trend Report by Period
International gold prices remained under pressure as rising oil prices and solid U.S. economic data stoked concern over additional Federal Reserve rate hikes.
Bloomberg reported that spot gold stood at $4,290.29 an ounce as of 8:08 a.m. Singapore time on September 23, up 0.1% from the previous day. Still, it was hovering around the $4,290 level after plunging 1.7% a day earlier.
A key weight on gold is the prospect of further Fed rate increases. Renewed tensions between the U.S. and Iran have lifted oil prices, while stronger-than-expected U.S. economic data has added to inflation concerns. Gold, which offers no interest income, typically becomes less attractive when rates rise.
U.S. Treasury yields also climbed sharply. Strong economic data and weak Treasury auctions pushed yields on most maturities to their highest levels in about 20 years. The five-year Treasury yield, in particular, rose above 5% for the first time since 2007.
U.S. economic activity expanded at the fastest pace in more than five years. S&P Global's preliminary September U.S. composite purchasing managers' index, or PMI, came in at 58.4, the highest since July 2021. The increase reflected gains in new orders and employment across both manufacturing and services.
Fed officials are also making the case for further tightening. Fed Governor Michael Barr said additional rate hikes will likely be needed to bring inflation back to the central bank's 2% target. Interest-rate swap markets are pricing in at least three more rate hikes by April next year.
Gold prices have fallen about 20% since the war between the U.S. and Iran began in late February. Spot silver was down 0.2% at $64.31 an ounce at the same time, while platinum and palladium also edged lower.
