Gold prices rose after weaker inflation data reduced bets that the Federal Reserve would raise interest rates at its next meeting, while high bond yields kept the door open for a renewed sell-off.
The price of the precious metal rose as much as 0.9% to $4,192 an ounce, after falling 0.6% the previous day. The Federal Reserve's preferred measure of core inflation, the personal consumption expenditures price index excluding food and energy, rose 0.2% in August, a smaller increase than expected. The previous month's reading was also revised downward.
Long-term Treasury yields climbed to multi-decade highs on Wednesday, as resilient spending reinforced expectations that the U.S. economy can withstand higher interest rates.
Data showing consumer spending in August rising at its fastest pace in more than a year led traders to reduce their expectations for the Federal Reserve raising interest rates in October to about 37%, compared with nearly 70% earlier in the week.
However, high yields and the continued risk of monetary tightening leave gold vulnerable to further selling, according to Eva Manthi, commodity strategist at ING Bank.
Gold loses 6% in September
Gold prices fell 6% in September, their worst monthly loss since June, after the Federal Reserve raised interest rates for the first time since 2023 and signaled the possibility of further monetary tightening.
Global bond yields also rose during the month, as concerns about rising government debt and deficits pushed up term premiums, increasing the opportunity cost of holding non-yielding gold.
Manav Mody, a commodities analyst at Motilal Oswal Financial Services, said that geopolitical uncertainty, particularly surrounding the stalled ceasefire talks between the United States and Iran, continues to provide support for gold as a safe haven, while high oil prices remain an inflationary risk.
Traders will be watching Friday's jobs report for further clues about the Federal Reserve's interest rate outlook.
Spot gold rose 0.5% to $4,176.14 an ounce by 3:13 p.m. Singapore time. Silver climbed 0.9% to $60.94 an ounce, after falling 1.7% in the previous session to an eight-week low.
Platinum and palladium also rose, while the Bloomberg Dollar Spot Index, a measure of the US currency, edged down slightly after rising 0.1% the previous day to a two-month high.
