Gold advanced as oil fell and an auction of 30-year US debt on Thursday drew solid demand, helping to pull long-dated yields from the highest levels in more than two decades.
Bullion rose as much as 1.8% to trade above $4,200 an ounce, extending gains from a two-month low earlier this week. Cheaper Treasury prices attracted investors to the 30-year sale, reducing yields across maturities and lifting some of the pressure on gold, which doesn’t pay interest.
Gold’s rebound “appears to be driven largely by some relief in the US Treasury market,” said Christopher Wong, a strategist at Oversea-Chinese Banking Corp. “The moderation in yields has provided an opportunity for some buying to return.”
Gold also found support from weaker oil prices after President Donald Trump said he’d refrain from attacking Iran before the US midterm elections, and described discussions with the country as productive.
Still, lingering inflation concerns continue to complicate the Federal Reserve’s policy outlook and the trajectory for gold, suggesting caution “about reading too much into the rebound just yet,” said OCBC’s Wong.
Traders expect US borrowing costs to stay unchanged later this month but increase over the medium term. Federal Reserve Bank of St. Louis President Alberto Musalem signaled on Thursday that interest rates should rise over the next six to nine months to help inflation return to the central bank’s 2% target, but stopped short of endorsing a move at this month’s policy meeting.
Gold was up 1.2% at $4,183.04 an ounce as of 12:54 p.m. in London, while silver was 2.1% higher at $60.44 an ounce, erasing losses from the previous session. Platinum and palladium also advanced. The Bloomberg Dollar Spot Index, a gauge of the US currency, was little changed.
