Gold Ticks Up As Softer Fed Rate Expectations Offset Higher Yields

Markets have pared bets for a Fed rate hike this month after softer-than-expected job growth in September and downward revisions to payrolls data for the previous two months

Gold edged up on Tuesday as easing expectations of a Federal Reserve interest-rate hike in October offset a firm US dollar and elevated US Treasury yields.

Spot gold rose 0.3% to $4,152.04 per ounce by 0909 GMT. US gold futures for December delivery rose 0.56% to $4,180.00 per ounce.

“Gold trades near key support just above $4,100, with macroeconomic headwinds from rising real yields and dollar strength continuing to weigh on investor appetite,” said Ole Hansen, head of commodity strategy at Saxo Bank.

The US dollar broadly held onto Monday’s gains, making greenback-denominated commodities more expensive for holders of other currencies. US 10-year and 30-year Treasury yields hit fresh 24-year highs on Monday.

Markets have pared bets for a Fed rate hike this month after softer-than-expected job growth in September and downward revisions to payrolls data for the previous two months.

Traders now see only a 21% chance of the Fed raising rates in October but are still pricing in an almost 70% probability of an increase in December, according to CME’s FedWatch Tool.

Higher rates increase the opportunity cost of holding
non-yielding gold.

“With limited US economic data due this week, market focus
will likely remain on the dollar, yields and ongoing political
and fiscal turmoil in the euro zone,” Hansen said.

Investors remain on edge about rising government debt levels
and widening budget deficits across parts of the euro zone,
particularly in France, pushing sovereign bond yields higher.

Meanwhile, oil prices fell on Tuesday as resilient Middle
Eastern crude exports and a G7 emergency stockpile release eased
supply concerns.

On the geopolitical front, Saudi-backed Yemeni government
forces staged a lightning advance to retake the coast around the
Bab el-Mandeb Strait up to the city of Mocha, the government
said, pushing the Iran-backed Houthis out of most of the areas
they seized last month. The moves could not be immediately
verified.

Among other metals, silver was flat at $61.10 per
ounce, platinum eased 0.6% to $1,710.71 and palladium
fell 1% to $1,160.66.