During ASIan trading hours on Friday (Oct 9), spot gold suddenly accelerated higher. A weaker US dollar and falling US Treasury yields boosted gold’s appeal. Meanwhile, market participants are weighing lingering inflation concerns and the outlook for the Federal Reserve’s future interest rate policy.
Spot gold jumped nearly $45 on the day, rising more than 1% to trade near $4178 per ounce. Earlier this week, gold hit a two-month low on Wednesday.
(Spot Gold 30-Minute Chart, Source: 24K99)
The dollar’s prior rally has temporarily stalled, making dollar-denominated gold cheaper for investors holding other currencies. At the same time, the benchmark 10-year US Treasury yield fell for the second consecutive trading session.
On the geopolitical front, US President Donald Trump stated on Thursday that the United States would not launch an attack on Iran before the November US congressional midterm elections.
He also claimed that the US and Iran are holding "productive" negotiations to end the six-month-long war.
Trump’s latest remarks weighed on oil prices, which in turn fueled gold’s rebound.
Tony Sage, CEO of Critical Metals, said: "Further potential monetary policy tightening may still pose downside risks for gold. Especially amid elevated oil prices driven by rising risks of supply disruptions in the Middle East, market worries over inflation remain high. Nevertheless, sustained gold purchases by central banks may help limit gold’s downside."
He added: "Looking ahead, traders will closely monitor upcoming economic data. These figures may offer more clues about monetary policy direction and shape market sentiment ahead of the Fed’s October rate meeting."
Last month, Fed policymakers voted unanimously to raise the policy interest rate by 25 bASIs points.
Alberto Musalem, President of the St. Louis Fed, said the Fed needs another rate hike to bring inflation back to the 2% target. Still, he declined to explicitly state what action policymakers should take at the meeting later this month.
According to the CME FedWatch Tool, traders currently price in an 18% probability of a Fed rate hike in October and an 82% probability for December.
Gold has long been viewed as an inflation hedge, yet higher interest rates typically reduce the appeal of this non-yielding asset.
Among other precious metals, spot silver rose 1.1% to $60.00 per ounce; platinum climbed 2.2% to $1670.15 per ounce; palladium gained 2.1% to $1146.98 per ounce.
However, despite Friday’s rebound, all three precious metals are still on track for weekly losses.