Gold prices moved lower on Tuesday as a stronger U.S. dollar and elevated Treasury yields outweighed support from fading expectations for another Federal Reserve rate hike.
Investors are now waiting for the minutes from the Fed’s September meeting for fresh clues about the central bank’s policy outlook.
Gold Prices Fall as Dollar Strengthens
At 02:15 ET, spot gold was down 0.5% at $4,120.16 an ounce, while U.S. gold futures slipped 0.2% to $4,146.80.
Other precious metals also moved lower.
Silver fell 1.2% to $60.35 an ounce, while platinum dropped 1.3% to $1,703.71. Palladium declined 1.4% to $1,161.00.
Meanwhile, the U.S. Dollar Index rose 0.1% to 102.27.
Treasury Yields Continue to Pressure Gold
Gold has been trying to recover as investors assess rising fiscal risks around the world and their possible impact on monetary policy.
In Europe, political uncertainty and fiscal concerns in France have increased demand for the U.S. dollar.
A selloff in parts of the European government bond market pushed the euro toward a 17-month low and helped lift the dollar close to its strongest levels of the year.
A stronger dollar usually weighs on gold because it makes the metal more expensive for buyers using other currencies.
French Fiscal Concerns Lift Bond Yields
Worries about France’s public finances have also contributed to higher global bond yields.
Bank of France Governor Emmanuel Moulin warned that rising interest costs could place increasing pressure on the country if fiscal conditions do not improve.
French government bond yields continued to rise as investors focused on the country’s debt outlook.
U.S. Treasury yields also moved higher on Monday, with longer-term rates reaching fresh multi-decade highs as the broader bond market selloff continued.
Higher bond yields can reduce the appeal of gold because the precious metal does not provide interest income.
Inflation Risks Keep Fed Tightening on the Table
A recent report from the U.S. Institute for Supply Management showed that service-sector cost pressures increased at their fastest pace in more than four years.
Persistent inflation pressures have kept the possibility of further Federal Reserve tightening alive, despite signs of weakness in the labor market.
Interest-rate markets were pricing roughly a 23% chance of a Fed rate hike in October.
Markets were also still expecting a full 25-basis-point increase by the December meeting.
Weak Jobs Data Reduces Near-Term Rate Hike Bets
Gold fell more than 6% in September as higher energy costs, expectations for tighter U.S. monetary policy and a stronger dollar weighed on prices.
However, expectations for an immediate Fed rate increase have fallen sharply since last week’s weaker-than-expected U.S. payrolls report.
Several Federal Reserve officials have also pushed back against expectations for an imminent rate hike.
That shift has offered some support for gold, although elevated bond yields remain a major headwind.
Fed Minutes Could Guide Gold’s Next Move
Investors are now focused on the minutes from the Federal Reserve’s September meeting.
The meeting marked the central bank’s first interest-rate increase in three years, making the minutes particularly important for understanding the Fed’s future policy direction.
ANZ analysts said gold has recovered from last week’s sharp decline as markets reassess growing fiscal pressures worldwide.
They also noted that expectations for another rate hike have fallen significantly following the softer payrolls data.
Markets are now assigning around a 20% probability of an October rate increase, compared with roughly 70% one week earlier.
