Gold rebounds on weaker dollar, yield drop

BENGALARU - Gold climbed more than 1% on Oct 15, looking set to snap three sessions of losses, supported by a weaker dollar and lower US Treasury yields, while expectations of a Federal Reserve rate hike in October remained subdued despite hotter-than-expected inflation data. Spot gold was up 1.1% at US$4,149 (S$5,321) per ounce by 12.36 am EDT (12.26pm Singapore time), after slipping to a one-week low in the previous session.

US gold futures for December delivery rose 1.5% to US$4,170.10 per ounce. The dollar slipped 0.4%, while the benchmark 10-year Treasury yield were at a three-week low. “I think the market was largely anticipating the hot PPI print in the wake of yesterday’s higher than expected CPI number,” said Peter Grant, vice-president and senior metals strategist at Zaner Metals.

“The market is starting to realize that the Fed is hamstrung to some degree because of the fiscal situation and that raising interest rates much higher is going to be quite a burden to the economy.” Higher interest rates make the non-yielding asset less attractive. US producer prices increased by the most in 4 1/2 years in September amid rising costs for goods and services, the latest indication of inflation broadening out beyond energy products.

The data followed the consumer price report on Oct 14, which showed prices accelerated in September on a surge in gasoline costs. Market pricing for an October Fed rate hike rose sharply after the CPI data. However, San Francisco Fed president Mary Daly and vice-chair for Supervision Michelle Bowman underscored that an immediate rate hike might not be required, tempering expectations of an October rate hike.

Traders are now pricing in about a 29% chance of a rate hike later in October, according to CME’s FedWatch Tool. Investors are also looking out for Federal Reserve chairman Kevin Warsh’s comments at the International Monetary Fund’s annual meeting at 11.30pm EDT (11.30am Singapore time) for any clues ahead of this month’s Fed meeting.

Among other metals, spot silver gained 2.3% to US$56.90 per ounce, platinum rose 0.4% to US$1,613.75 per ounce and palladium climbed 3.2% to US$1,129.20 per ounce. REUTERS