Gold Under Pressure From Oil and Bonds

Gold prices fell yesterday under pressure from rising U.S. Treasury yields and higher oil prices, as traders awaited the release of the Federal Reserve’s July meeting minutes in search of clues about the interest rate trajectory. Spot gold declined 0.5% to $4,391.14 per ounce, while U.S. December gold futures dropped 0.6% to $4,446.70.

Yields on 10-year U.S. Treasury bonds continued to rise, increasing the opportunity cost of holding gold, which generates no yield. Oil prices also edged higher after Iran announced it would shift to a fully “offensive” military posture, following stalled negotiations to reach a permanent end to the war with the United States, while Washington ruled out extending the temporary ceasefire agreement.

Sonu Komari, an analyst at ANZ, said oil prices would remain a key factor weighing on gold, amid ongoing uncertainty about developments in the Middle East. She added that traders’ expectations regarding the Fed’s interest rate path would be an important factor for gold, alongside monitoring technical levels.

High energy prices typically fuel inflation concerns and reinforce expectations that interest rates will remain elevated for longer. Although gold is traditionally viewed as a hedge against inflation, higher interest rates reduce the appeal of the non-yielding precious metal.

Market expectations for the Fed’s September decision have shifted from a likely 25-basis-point rate cut to a roughly 65% probability of holding rates unchanged, following unexpected job losses in July, slower-than-expected disinflation in consumer prices, and weak retail sales.

Silver fell 1% in spot trading to $65.11 per ounce, platinum dropped 1.2% to $1,748.56, and palladium declined 1.2% to $1,317.01.