Gold Prices Rebound as Dollar and Treasury Yields Ease Despite Higher US Inflation
Gold prices advanced on Thursday as a weaker US dollar and declining Treasury yields supported demand for the precious metal, despite stronger-than-expected US inflation figures that increased expectations of further Federal Reserve interest rate rises.
At 04:41 ET (08:41 GMT), spot gold gained 1.2% to $4,152.51 per ounce, while US gold futures rose 1.6% to $4,173.75 per ounce.
The recovery followed an initial sharp decline on Wednesday after US consumer price data showed inflation accelerating more than economists had anticipated, largely reflecting higher energy costs associated with the conflict involving Iran.
Although the inflation report initially pushed Treasury yields and the dollar higher, both subsequently retreated as investors reassessed the outlook for monetary policy and sought safer investments amid weakness in technology stocks.
US Inflation Data Raises Expectations of Further Fed Rate Increases
Wednesday’s US consumer price report prompted investors to increase expectations that the Federal Reserve could raise interest rates at its next policy meeting on 27–28 October.
The stronger inflation figures reflected continued price pressures, with rising energy costs contributing significantly to the increase.
Following the release, US Treasury yields briefly climbed as bond prices fell, while the dollar strengthened against other major currencies.
Higher interest rates generally create challenges for gold because the metal does not generate interest income, making interest-bearing investments relatively more attractive.
A stronger dollar can also reduce international demand for bullion by increasing its cost for buyers using other currencies.
However, expectations for an immediate rate increase subsequently moderated as financial markets absorbed the inflation figures and broader economic developments.
Analysts at Vital Knowledge noted that investors were pricing in approximately 30 basis points of additional Federal Reserve rate increases over the remainder of 2026, compared with around 25 basis points previously.
The adjustment suggested that markets continued to anticipate tighter monetary policy, although the initial reaction to the inflation report had eased.
Treasury Yield Decline and Weaker Dollar Support Gold
Gold benefited from a reversal in US bond yields as investors moved towards government securities following a sell-off in artificial intelligence-related stocks.
The weakness in technology shares encouraged some market participants to reduce exposure to riskier assets and increase holdings of US Treasury bonds.
