Gold prices declined on Tuesday morning, trading around $4,125 per ounce, pressured by elevated US Treasury yields and renewed concerns over inflation as oil prices moved higher. Brent crude has been trading close to a five-month high, following renewed tensions in the Middle East after Houthi attacks on Saudi targets raised concerns over potential disruptions to energy supplies. Persistently high energy prices are contributing to inflationary pressures, reinforcing expectations that the Federal Reserve may need to tighten monetary policy further before the end of the year.
Meanwhile, political and fiscal uncertainty in France has triggered a sell-off in French government bonds, adding to volatility across global debt markets and potentially putting further upward pressure on US Treasury yields. Higher yields, alongside a relatively strong dollar, tend to weigh on gold by increasing the opportunity cost of holding an asset that offers no interest. However, the precious metal continues to find some support from safe-haven demand amid geopolitical tensions and concerns over elevated equity valuations, particularly in the technology sector.
Looking ahead, investors will be focusing on next week's Federal Reserve meeting and US PCE inflation figures. Although an October rate increase is now considered unlikely, markets continue to anticipate further tightening in December. A less hawkish Fed message or signs of easing inflationary pressures could provide support for gold, while the prospect of higher interest rates may continue to limit gains.
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