Gold prices moved lower again on Wednesday, reaching their lowest level in more than three weeks as markets assessed higher oil prices, rising global government bond yields, a firmer U.S. dollar and expectations surrounding the Federal Reserve’s next interest-rate decision.
At 01:52 ET (05:52 GMT), XAU/USD declined 0.4% to $4,311.83 an ounce, while Gold Futures fell 0.9% to $4,358.24. XAG/USD was down 0.4% at $63.82 an ounce, with XPT/USD also declining 0.4% to $1,736.87.
The U.S. Dollar Index increased 0.1% to 99.77.
Higher Oil Prices Add to Inflation Focus
Gold was on course for its fourth consecutive daily decline, leaving the metal approximately 8% below the previous week’s high near $4,700.
The move followed another round of U.S. strikes against targets in Iran on Tuesday. Tehran said it retaliated, following almost a month of relative calm.
Brent crude moved above $95 a barrel, while U.S. crude exceeded $91 as traders considered whether an extended conflict could disrupt energy flows through the Strait of Hormuz.
Oil prices are being monitored for their potential effect on inflation because higher energy costs can contribute to broader price pressures. This has added to investor attention on the outlook for Federal Reserve monetary policy.
Markets were assigning a probability of close to 70% to a Federal Reserve rate increase at the 15-16 September meeting.
Fed Comments Keep Interest-Rate Outlook in Focus
Expectations for interest rates have also been influenced by Federal Reserve Chair Kevin Warsh’s comments at Jackson Hole last week and subsequent remarks from other policymakers about inflation.
Fed Governor Michael Barr said on Tuesday that policymakers should be prepared to raise interest rates if inflation does not moderate. He also warned that price pressures could become embedded after inflation remained above the Fed’s target for more than five years.
The remarks reflect policymakers’ assessment of inflation risks. Any future change in interest rates remains dependent on incoming economic data and decisions by the Federal Reserve.
Long-Dated Treasury Yields Return to Earlier Levels
The increase in yields has also affected global government bond markets, with long-dated U.S. Treasury yields returning to levels seen before the Treasury’s intervention in the bond market last month.
The U.S. 30-year Treasury yield moved above 5.28% on Tuesday, around the level recorded before Treasury Secretary Scott Bessent announced an expansion of bond buybacks on 19 August.
Government bond yields have also risen across other major markets, with global yields reaching their highest levels since 2008, according to the supplied information.
The dollar has strengthened alongside the rise in yields. A stronger U.S. currency can make dollar-denominated gold more expensive for buyers using other currencies. At the same time, higher yields increase the returns available from interest-bearing securities compared with gold, which does not pay interest.
Gold Pulls Back After Nearly 10% August Gain
The recent decline follows an advance of almost 10% for gold in August, representing its largest monthly increase since January.
Gold’s August advance accelerated after the U.S. Treasury expanded its bond-buyback programme. Concerns surrounding sovereign debt and potential currency depreciation were also among the factors being considered by investors during the period.
ANZ said the Treasury’s liquidity measures initially encouraged investors to increase their exposure to gold. The bank said the subsequent reversal in bond yields and the dollar has limited that momentum, although it expects the broader currency-debasement theme to continue attracting buyers.
ANZ’s expectations represent the bank’s outlook and are not an established future outcome.
Gold has also moved below its 200-day moving average, a technical indicator commonly monitored as a measure of longer-term price momentum.
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