Gold Under Pressure Again; Fed and Yields in Focus

Gold prices lost momentum during the US trading session on Friday (Sept 18) after briefly approaching the US$4,400 per troy ounce level. Spot gold (XAU/USD) was recently trading around US$4,354 per troy ounce, up slightly by approximately 0.29% for the day. Gold's movement remains overshadowed by the Federal Reserve's hawkish stance—which keeps the US dollar strong—and a renewed rise in US Treasury yields.

Gold experienced a highly volatile week after the Fed raised interest rates by 25 basis points to the 3.75%–4.00% range last Wednesday. That decision marked the first rate hike since 2023 and immediately drove a strengthening dollar and rising US bond yields, pushing gold down to a more-than-one-month low near US$4,235.

Pressure on gold eased after oil prices weakened following reports that Saudi Arabia was diverting some exports and working to repair the damaged East-West pipeline. The drop in energy prices helped alleviate inflation concerns, thereby reducing pressure regarding expectations for more aggressive rate hikes.

However, the outlook for gold still faces challenges from Fed monetary policy. Recent projections indicate that 16 out of 18 Fed officials anticipate at least one additional rate hike this year. Markets also estimate a roughly 55% probability of a rate hike at the October meeting, keeping the US dollar strong with the DXY hovering around the 100.50 level.

In addition to the dollar, rising Treasury yields pose another headwind for gold. The 10-year Treasury yield is again nearing the 5% mark—trading around 4.99%—thereby increasing the opportunity cost of holding non-yielding assets like gold. Meanwhile, oil prices recovering from lows due to risks of disruption in the Strait of Hormuz are keeping concerns regarding energy-driven inflation alive.

Newsmaker Analysis: Gold is currently caught in a tug-of-war between pressure from Federal Reserve policy and support stemming from safe-haven appeal and long-term demand. In the short term, gold requires a weaker dollar, lower Treasury yields, or a shift in expectations regarding Fed interest rates to resume its upward trend. However, central bank demand and investment inflows into gold ETFs remain supportive factors that keep the long-term outlook for gold positive. (arl)

Source: Newsmaker.id