Gold hits two-week high as dollar and bonds retreat

Gold prices rose to their highest level in over two weeks amid a decline in the US dollar and Treasury yields, as inflation fears eased thanks to falling oil prices.

By 1612 GMT, spot gold rose 0.9 percent to $4,095.49 per ounce. The precious metal touched $4,146.63 per ounce earlier in the session, marking its highest level since October 20.

Gold surged approximately 3.4 percent on Wednesday, recording its largest one-day gain since August 19. Prices have risen by more than $250 this week from their lowest level in a year, which stood at $3,869.85 per ounce recorded on Friday.

The US dollar approached its lowest level since September 30, making dollar-denominated gold cheaper for holders of other currencies. Meanwhile, the yield on the benchmark 10-year US Treasury note hit its lowest level in nearly two months.

David Major, metals trading director at High Ridge Futures, said, “It’s not about the complete disappearance of rate hike expectations at this stage. With falling energy prices, there are expectations that some inflation concerns will recede, and the need for future rate hikes may diminish.”

Brent crude remained below $100 per barrel after plunging nearly 9 percent on Wednesday, on hopes that significant gains by Democrats in the US elections would reduce the risk of further escalation in the Iran conflict.

Data from CME Group’s FedWatch tool indicated that traders currently expect an 80 percent probability that the Federal Reserve (the US central bank) will raise interest rates in December. Higher interest rates increase the opportunity cost of holding gold, which yields no return.

Investors are now awaiting the US non-farm payrolls report, to be released tomorrow, Friday, to better assess the Federal Reserve’s monetary policy outlook.