Gold prices slipped modestly on Wednesday but remained within reach of a three-month high as declining oil prices and lower US Treasury yields reduced concerns over inflation and supported the broader outlook for bullion.
Investors were also closely following diplomatic developments involving Iran and Oman, with discussions over the Strait of Hormuz raising hopes that more commercial shipping could resume through the strategically important waterway.
At 01:10 ET, or 05:40 GMT, XAU/USD declined 0.4% to $4,642.38 an ounce, while gold futures edged 0.1% higher to $4,699.04.
Elsewhere, XAG/USD gained 0.7% to $69.05 an ounce and XPT/USD rose 0.3% to $1,866.89. The US Dollar Index increased 0.1% to 99.01.
Gold retains support after strong weekly rally
Bullion has climbed more than 7% over the past week and remains close to the three-month peak reached in the previous session.
Part of that strength has come from falling US Treasury yields and weaker crude prices, which have helped reduce inflation concerns and eased some of the pressure on expectations for Federal Reserve monetary policy.
Treasury yields fell by roughly five to seven basis points across the curve on Tuesday. Oil prices also moved lower as markets became more optimistic about the possibility of easing tensions in the Middle East.
Iran and Oman have discussed establishing a “temporary joint maritime corridor” that could allow some shipping to restart through the Strait of Hormuz.
The direction of energy prices has important implications for bullion. Higher oil costs can feed into broader inflation, potentially giving the Fed another reason to maintain restrictive interest rates.
That environment can be negative for gold because the metal offers no interest income and must compete with yield-bearing assets. Falling yields, by contrast, tend to improve the relative appeal of holding bullion.
Fiscal concerns keep debasement trade alive
The recent gold rally has also renewed attention on the so-called debasement trade, which reflects investor concerns over government borrowing, fiscal policy and the long-term value of fiat currencies.
ANZ analysts said US Treasury Secretary Scott Bessent had offered no new indication regarding the debt-management measures announced last week.
Reports have nevertheless suggested that the Treasury could use some of its cash balance to finance buybacks of older securities carrying higher yields.
Such developments have kept concerns over sovereign debt management in focus and reinforced gold’s role for some investors as an alternative to government bonds and currencies.
PCE inflation and Jackson Hole could determine gold’s next move
Markets are now preparing for two significant US policy events that could influence the direction of gold.
The Personal Consumption Expenditures report due on Wednesday will provide a fresh assessment of inflationary pressure and economic conditions in the US.
Boston Fed President Susan Collins has said she favours keeping interest rates unchanged for the time being, provided inflation continues moving towards the Federal Reserve’s 2% objective.
Attention will then shift to Federal Reserve Chair Kevin Warsh, who is scheduled to deliver his first major speech as chair at the Jackson Hole symposium on Friday.
Investors will be looking for clearer guidance on how Warsh assesses persistent inflation risks against the wider economic outlook, as well as the circumstances that could prompt the central bank to change interest rates.
Warsh has faced criticism over uncertainty surrounding his economic views, increasing the importance of Friday’s address for financial markets.
Gold’s strong recent performance has meanwhile brought the debasement trade back into focus after the theme helped propel bullion higher in 2025. Concerns over fiscal deficits, sovereign debt and the purchasing power of conventional currencies could continue to provide an underlying source of demand for the precious metal.
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