Gold prices declined further on Wednesday, reaching their lowest level in more than three weeks as investors assessed higher oil prices, rising government bond yields, a stronger U.S. dollar and expectations for Federal Reserve monetary policy.
At 01:52 ET (05:52 GMT), XAU/USD fell 0.4% to $4,311.83 an ounce, while Gold Futures declined 0.9% to $4,358.24. XAG/USD was down 0.4% at $63.82 an ounce and XPT/USD fell 0.4% to $1,736.87.
The U.S. Dollar Index gained 0.1% to 99.77.
U.S.-Iran Developments Keep Oil and Inflation in Focus
Gold was heading for a fourth consecutive session of declines and was down approximately 8% from the previous week’s high near $4,700.
The latest moves came after the United States carried out another round of strikes against targets in Iran on Tuesday. Tehran said it retaliated, following a period of relative calm lasting almost a month.
Brent crude moved above $95 a barrel and U.S. crude exceeded $91 as traders assessed the potential for a prolonged conflict to affect energy flows through the Strait of Hormuz.
Higher energy prices can contribute to inflation, making the outlook for oil one of the factors being considered by investors assessing future Federal Reserve policy.
Markets were pricing a probability of close to 70% of a Federal Reserve interest-rate increase at the 15-16 September meeting.
Fed Officials Address Inflation Risks
Market expectations followed Federal Reserve Chair Kevin Warsh’s comments at Jackson Hole the previous week and further remarks from Fed officials concerning inflation.
Fed Governor Michael Barr said on Tuesday that policymakers should be prepared to increase interest rates if inflation does not ease. He also warned that price pressures could become embedded after inflation remained above the Federal Reserve’s target for more than five years.
The comments represent policymakers’ assessment of inflation risks, while future interest-rate decisions remain dependent on economic data and Federal Reserve deliberations.
U.S. 30-Year Treasury Yield Moves Above 5.28%
Long-dated U.S. Treasury yields have moved back towards levels recorded before the Treasury’s intervention in the bond market last month.
The 30-year Treasury yield rose above 5.28% on Tuesday, returning to around the level recorded before Treasury Secretary Scott Bessent announced an expansion of bond buybacks on 19 August.
Government bond yields have also increased across other major markets, with global yields reaching their highest levels since 2008, according to the supplied information.
The U.S. dollar has strengthened alongside the increase in yields. A stronger dollar can increase the cost of dollar-denominated gold for buyers using other currencies, while higher bond yields increase the returns available from interest-bearing assets relative to non-yielding gold.
Gold Retreats Following August Advance
Gold’s recent decline follows an increase of almost 10% in August, which was its largest monthly gain since January.
The August move accelerated after the U.S. Treasury expanded bond buybacks. Concerns about sovereign debt levels and potential currency depreciation were also among the themes being considered by gold investors.
ANZ said the Treasury’s liquidity measures had initially encouraged investors to increase their exposure to gold. According to the bank, the subsequent reversal in yields and the dollar has reduced that momentum, although ANZ expects concerns around currency debasement to continue attracting buyers.
That outlook represents ANZ’s assessment and is not an established future outcome.
From a technical perspective, gold has also moved below its 200-day moving average, a widely monitored indicator of longer-term price momentum.