Gold spiked to $4,251 on Wednesday but was sold within hours, even as softer inflation data cut the odds of an October Fed rate hike. The reason: long-term Treasury yields kept climbing anyway, and those yields, not the Fed's overnight rate, set gold's real competition.
Gold's rally this week had a short half-life. The metal touched $4,251 on Wednesday before the gain was sold off within hours. That happened even as softer core PCE inflation data cut the odds of an October Fed hike from about 70% to about 37%. A softer Federal Reserve outlook should lift gold, because the metal pays no interest and competes with the yield investors give up by holding it. But that logic only holds if long-term borrowing costs follow the Fed lower.
Long Yields Refuse to Fall
This week they did not. The 10-year Treasury yield touched 5.344% on Thursday before closing at 5.248%, after reaching 5.30% earlier in the week, its highest level since 2007.
The 30-year yield traded above 5.66%, a 24-year high. The 10-year is up 87 basis points over the past three months, on pace for an eighth straight weekly gain. The Treasury's attempt to cap the move did not help either: its enlarged bond buyback filled only $5.19 billion of a planned $6 billion in September.
Those long yields are also propping up the dollar, because they raise what foreign investors earn holding dollar assets. The US Dollar Index rose for a fourth straight session to close near 102.1, its highest level since April 2025, after touching 102.20. The euro fell below 1.13 for the first time since May 2025 on dearer oil and French budget concerns. That slide added to the dollar index's strength.
Gold and Silver Diverge From the Miners
Thursday's inflation signals were hawkish — the ISM's prices-paid index jumped to 77.9 from 71.1 — yet gold still rose. It gained $15.60 to close at $4,202.30, following an afternoon reversal in the 10-year yield. It then traded near $4,214 Friday morning, below Wednesday's $4,251 high.
The internals looked uneven: silver rose 1.01%, almost three times gold's 0.37% gain, while senior gold miners fell 1.21%. The September jobs report, due Friday at 8:30 a.m. Eastern with a consensus of about 90,000 jobs and unemployment at 4.1%, is the next test of whether a weak print can still move gold, after soft inflation data failed to hold a rally earlier in the week.
Source: Investing.com
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