Gold recovers from two-month low as dollar rally stalls
Gold prices edged higher on Thursday as the dollar eased from an 18-month peak, lifting bullion off a two-month low, while traders weighed the prospect of another US Federal Reserve rate rise this year. Spot gold was up 0.5% at $4,132.66 per ounce by 0140 GMT, having touched its lowest level since August 5 on Wednesday as a firmer dollar and higher US Treasury yields weighed on the market. US gold futures for December delivery gained 0.4% to $4,157.60.
The pullback in the dollar supported demand for greenback-priced gold, which becomes cheaper for buyers using other currencies. Chris Weston, head of research at Pepperstone, said the metal's short-term investment case "remains challenged", adding that "for now, it remains a seller's market, and we would need to see a break above $4,275 to become more constructive on the near-term upside". Weston also said that if markets begin treating rising long-end yields as a reflection of sovereign credit and fiscal risk rather than stronger economic fundamentals, gold could diverge positively from bond yields.
Fed policymakers were divided last month over the rationale for raising interest rates, minutes showed, with "some participants" seeing a hike as needed to keep the impact of energy and other price shocks at bay, while a more hawkish core viewed one as necessary to guard against emerging demand-driven inflation. Traders see only an 18% chance of a rate rise later this month but are pricing in an 80% likelihood of an increase in December, according to CME's FedWatch tool. Higher rates diminish the appeal of non-yielding gold.
Separately, International Monetary Fund managing director Kristalina Georgieva warned that persistently high energy prices, record public debt and risks from the artificial intelligence investment boom pose a threat to the global economy, and urged governments to implement protective fiscal and monetary policy measures.
