Gold prices edged higher on Tuesday after falling 4% in the previous session, but remained near a seven-week low as elevated energy prices and rising US Treasury yields increased expectations for further Federal Reserve interest rate increases.
At 00:13 ET (04:13 GMT), XAU/USD rose 0.4% to $4,131.10 an ounce, while gold futures declined 0.2% to $4,162.32.
Silver fell 0.3% to $60.45 an ounce, while platinum declined 1% to $1,700.17. The US Dollar Index increased 0.1% to 101.27.
Oil and Treasury Yields Remain Elevated
Oil prices extended their gains as negotiations between the US and Iran over the Strait of Hormuz remained unresolved.
Iranian officials had privately expressed pessimism about reaching an agreement with Washington to end hostilities before the US midterm elections in November, according to the supplied material, after President Donald Trump rejected Tehran’s latest proposal to reopen the waterway within seven days.
The US-Iran conflict has continued for eight months, affecting energy flows and inflation expectations.
Higher oil prices were accompanied by further selling in the US Treasury market on Monday. The 10-year Treasury yield reached a fresh 19-year high.
Higher government bond yields can increase the opportunity cost of holding gold because the metal does not generate interest income.
The Treasury selloff that began after the US-Iran conflict started in late February has accelerated over the past month, while higher yields have increased borrowing costs.
The Trump administration has increased Treasury buybacks in an effort to reduce pressure on longer-term borrowing costs, although yields have continued to rise.
Cleveland Federal Reserve President Beth Hammack said the increase in longer-term yields reflected several factors, including expectations for stronger economic growth, concerns about government debt and expectations for additional interest rate increases.
Gold Falls Around 7% in September
Gold has declined approximately 7% during September after trading around $4,510 an ounce earlier in the month.
The decline followed the Federal Reserve’s first interest rate increase since 2023. Policymakers have also left open the possibility of additional increases as they assess persistent US inflation.
Markets were pricing in approximately a 70% probability of another rate increase in October, according to the supplied material.
ANZ analysts said gold had fallen to around $4,130 an ounce as rising US Treasury yields prompted renewed selling, while higher energy prices increased expectations for another near-term Federal Reserve rate increase.
Federal Reserve Governor Lisa Cook said on Monday that productivity improvements associated with artificial intelligence may not be sufficient to offset near-term inflationary pressures.
Cook also said investment in data centres was increasing competition for resources including energy and construction labour.
ANZ said the near-term macroeconomic environment remained difficult for gold because of higher yields and inflation risks.
Markets will next assess Wednesday’s personal consumption expenditures inflation data, the Federal Reserve’s preferred inflation measure, followed by Friday’s nonfarm payrolls report for further indications about the outlook for interest rates.