Gold prices fell to a two-month low on Wednesday, with spot gold down 1.6% at $4,096.13 an ounce by 9:20 a.m. Eastern time, or 13:20 GMT, under pressure from a stronger dollar and higher U.S. Treasury yields as investors awaited the minutes of the Federal Reserve’s September meeting.
Dollar and yields weigh on gold
Gold touched its lowest level since August 5, while December futures fell 1.6% to $4,121.70. Meanwhile, the U.S. dollar index rose 0.7%, making dollar-denominated gold more expensive for holders of other currencies.
Yields on 10-year U.S. Treasury notes reached their highest level in more than two decades. Higher interest rates reduce the appeal of gold, which pays no income.
Markets are still pricing in at least one rate hike before the end of the year. I think the message is that interest rates will remain higher for longer, keeping bond yields and the dollar supported
Markets await Fed minutes
Markets largely expect the Federal Reserve to leave interest rates unchanged later this month, but are pricing an 84% probability of a rate hike in December, according to CME Group’s FedWatch tool.
Jeff Schmid, president of the Federal Reserve Bank of Kansas City, said further interest-rate increases are needed to curb inflation. In contrast, Mary Daly, president of the Federal Reserve Bank of San Francisco, said the future path of monetary policy would depend on how persistent inflationary pressures prove to be.
Minutes of the Federal Reserve’s September meeting are scheduled for release at 2:00 p.m. Eastern time, or 18:00 GMT.
Official demand provides support
Grant described official-sector demand for gold as the metal’s main source of support. In energy markets, oil prices rose as supply risks from the Middle East persisted and a storm approached U.S. oil-producing regions.
