Spot gold climbed 0.4% to $4,195.56 an ounce at 07:08 GMT, or 3:08 a.m. ET, Wednesday, extending its recovery from this week’s seven-week low while remaining under pressure from elevated U.S. interest rates.
The Reuters market observation put bullion $16.97 above the $4,178.59 level recorded at 00:37 GMT, an increase of about 0.41% between the two observations. U.S. gold futures were up 1.1% at $4,227.50 at the later observation.
The move marks a further rebound after Investozora reported Tuesday that gold was recovering from a seven-week low. It does not, however, reverse September’s broader retreat: spot gold was still down more than 5% for the month at the 07:08 GMT observation.
Gold rebounds as Treasury yields ease from recent highs
Gold’s recovery coincided with some relief in the Treasury market after the sharp rise in longer-term borrowing costs that has defined recent sessions.
The benchmark 10-year Treasury yield was around 5.23% in Wednesday trading after reaching roughly 5.27%, while the 30-year yield was near 5.56%. The Treasury Department’s daily par yield curve data show how sharply long-term yields had already risen during September.
That matters for bullion because gold produces no interest income. Higher yields increase the return available from competing interest-bearing assets, although the relationship is not mechanical and gold can move for other reasons.
The latest rebound therefore should not be read simply as Treasury yields “causing” gold to rise. It occurred as yields eased from their recent highs and investors reassessed the path of Federal Reserve policy.
New York Fed President John Williams said Tuesday that, following September’s rate increase, there was “no need for urgency” on another move and that policymakers had time to collect more information. In his September 29 remarks, Williams said one additional upward adjustment to the federal funds target range may be appropriate later this year if the economy develops broadly in line with his forecast.
That is a more conditional policy signal than markets had been confronting earlier in the week. Investozora has been tracking the same repricing through the recent surge in the 10-year Treasury yield.
The $4,200 level is back in focus
Wednesday’s move puts spot gold back within a few dollars of $4,200, but the more important question is whether the recovery can survive the next round of U.S. inflation and labor-market evidence.
ADP reported Wednesday that U.S. private employers added 90,000 jobs in September, up from a revised 36,000 in August. The private-payroll estimate is separate from the Labor Department’s official employment report and should not be treated as a substitute for Friday’s payroll figures.
The Bureau of Economic Analysis scheduled its August Personal Income and Outlays report, including the PCE price indexes — for 8:30 a.m. ET Wednesday. In the previous release, headline PCE inflation was 3.7% year over year in July and core PCE inflation was 3.3%, according to BEA’s July report.
For gold, the next test is therefore not simply whether $4,200 trades again. It is whether incoming inflation and employment data materially change expectations for the Fed and the Treasury-yield environment that has weighed on bullion through September.
