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Gold slides to a one-week low as Fed hawkishness lifts yields, dollar

Gold prices fell even as the 10-year US Treasury yield jumped 15.2 bps to about 5.15%, with the Fed rate increase odds rising to around 75% for October.

Reported · Written up by our desk · Major Pairs

Gold prices slid to a one-week low on Thursday as expectations of a more hawkish Federal Reserve pushed up US Treasury yields and strengthened the US dollar, FXStreet reported. At the time of writing, XAU/USD traded around $4,260, down nearly 0.65% on the day.

The 10-year US Treasury note yield rose 15.2 basis points on Wednesday to about 5.15%, its highest level since 2007, while shorter-dated yields also hovered near multi-year highs. FXStreet linked the move partly to a strong batch of US S&P Global Purchasing Managers’ Index data, with the Composite PMI unexpectedly rising to a five-year high of 58.4 in September.

With the stronger economic print and Fed messaging, FXStreet said expectations increased that the Fed could raise rates again in October after a 25 bps hike last week. The CME FedWatch Tool put the probability of an October increase at around 75%, up from 55% a day earlier, while the US Dollar Index traded around 101.27, its highest level in two months.

FXStreet also cited remarks from New York Fed President John Williams that inflation needs to return to the 2% target in a timely manner, and that another rate hike by year end could be reasonable. Higher borrowing costs, a firmer dollar for overseas buyers, and inflation risks including elevated oil prices related to the Middle East war were cited as supporting pressure on gold.

Latest closeGold $4,323.20 ▼1.2%|Dollar index 101.16 ▲0.7%

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