Gold Prices Slip as Strong Dollar and High Treasury Yields Weigh

Gold prices declined on Tuesday as a stronger U.S. dollar and elevated Treasury yields pressured precious metals, offsetting support from reduced expectations for an immediate Federal Reserve interest rate hike.

Spot gold fell 0.5% to $4,120.16 an ounce at 02:15 ET (06:15 GMT), while U.S. gold futures slipped 0.2% to $4,146.80. Silver dropped 1.2% to $60.35 an ounce, platinum declined 1.3% to $1,703.71, and palladium fell 1.4% to $1,161. The U.S. Dollar Index gained 0.1% to 102.27.

The dollar has benefited from political uncertainty and fiscal concerns in Europe, particularly France. Policy gridlock and worries about public finances have pressured European government bonds and pushed the euro to a 17-month low, helping the greenback approach its strongest levels of the year.

A stronger dollar typically weighs on gold because it makes the dollar-denominated metal more expensive for holders of other currencies. Rising global bond yields have added further pressure. U.S. Treasury yields remained elevated after longer-term yields reached fresh multi-decade highs, increasing the opportunity cost of holding non-yielding gold.

Inflation concerns also remain in focus. A U.S. Institute for Supply Management report showed services-sector cost pressures accelerated last month at their fastest pace in more than four years, keeping the possibility of additional Federal Reserve tightening alive.

Interest-rate swaps indicated roughly a 23% probability of an October Fed rate hike, while markets continued to price in a full 25-basis-point increase by December.

However, weaker-than-expected U.S. payroll data has significantly reduced expectations for an imminent rate increase. Gold fell more than 6% in September amid energy-driven inflation concerns, a stronger dollar and expectations for higher U.S. interest rates.

Investors are now awaiting minutes from the Federal Reserve’s September meeting, when policymakers raised rates for the first time in three years. The minutes could provide fresh clues about the path of U.S. monetary policy.

ANZ analysts said gold has recovered somewhat from last week’s sharp decline as investors reassess global fiscal pressures and lower near-term Fed rate hike expectations.