Bullion retreats in Asian trading after a Wall Street rebound, with a firm dollar and cautious investors limiting its record-breaking rally ahead of next week’s Federal Reserve meeting.
Gold eased back below the $4,100-an-ounce mark in Asia on Thursday after a modest Wall Street rebound, as traders waited for the US Federal Reserve’s next policy meeting and weighed a still-firm dollar against falling Treasury yields. Spot gold had finished the New York session at $4,142.40 an ounce, but turned lower in early Asian trade, while silver also slipped. Reuters reported that investors were becoming more cautious ahead of the Fed decision next week.
The move comes after an extraordinary run for bullion this year, driven by safe-haven demand, repeated bouts of geopolitical tension and a broader search for protection against inflation and financial market volatility. The World Gold Council said in its October 2023 market commentary that sustained gains in gold typically depend on worsening political risk, peaking bond yields and a softer dollar, or a bear market in equities coupled with renewed recession fears. That framework still helps explain why the metal is finding support, even as it struggles to extend the latest rally.
On Thursday, the dollar index edged higher to around 101.8, while yields on benchmark US Treasuries were mixed, with the 10-year yield rising slightly and the 30-year yield easing. Those moves matter because gold does not pay interest: lower yields tend to make it more attractive, while a firmer dollar can make it more expensive for buyers using other currencies. Even so, both the dollar and long-term Treasury yields have retreated from their recent peaks, reducing some of the pressure that had weighed on bullion earlier this month.
The market is now heavily focused on the Fed meeting on Tuesday and Wednesday next week. According to CME’s FedWatch Tool, traders are almost fully pricing in no change to rates on 28 October, but they still see a strong chance of another increase in December. Peter Grant, vice-president at Zaner Metals, told Reuters that investors are still expecting one more quarter-point rise this year, though he said October now looks far less likely. Giovanni Staunovo of UBS told Reuters that gold may stay in a consolidation phase for now, with dips below $4,100 drawing buying but upside limited unless the Middle East conflict eases.
For gold traders, the next key test may come a day after the Fed decision, when the US publishes its September personal consumption expenditures price index, the central bank’s preferred inflation gauge. The combination of that data, the Fed’s tone on future rates and any further shifts in the dollar or Treasury market is likely to set the direction for bullion in the near term. The SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, reported net selling of 2.6 tonnes in the latest session, a reminder that even as broader demand remains strong, some investors are still trimming exposure at elevated prices.
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