Gold slipped below $4,150 an ounce on Wednesday as a stronger dollar offset falling Treasury yields and fading bets on an October Fed rate hike. Oil supplies from the Middle East have recovered to about four-fifths of pre-conflict levels, easing some inflation pressure, though the metal stays rangebound ahead of next week's US CPI report and further US-Iran developments.
Gold fell 0.7% to $4,136.82 an ounce on Wednesday, slipping below the $4,150 level as a stronger dollar offset a pullback in Treasury yields. Gold futures dropped 0.6% to $4,163.07, while the U.S. Dollar Index rose 0.3% to 102.09.
The metal remains in a tight range this month, trading below several closely watched price averages. It is down more than 20% since the US-Iran conflict began in late February.
Dollar strength outweighs fading rate-hike bets
Treasury yields retreated on Tuesday after longer-dated maturities surged to fresh multi-decade highs a day earlier, which reduced the opportunity cost of holding the non-yielding metal. Yet traders are now pricing in a less than 20% probability of an October rate hike, down from about 40% a week earlier, as Federal Reserve officials continue to push back against an imminent increase. Minutes from the Fed's September meeting, when policymakers raised borrowing costs for the first time in three years, were due later Wednesday.
Oil supply recovery eases inflation pressure
Oil supplies from the Middle East have recovered to roughly four-fifths of pre-conflict levels, according to analysts and research firms, helping stabilize prices and ease pressure on the Fed's rate outlook. Risks remain elevated, however: Iran has increased attacks on tankers in the Strait of Hormuz in recent days, and oil executives have warned the industry is running out of temporary measures as the US-Iran war approaches its eighth month.
Earlier in the week, Houthi attacks on Saudi Arabia, including on airports, along with reports of damage to Saudi energy infrastructure, pushed oil prices higher and lifted Treasury yields and the dollar, weighing on gold. A developing storm is also threatening US Gulf production and refining infrastructure, and Reuters estimated facilities responsible for around 15% of US crude output and 5% of natural-gas production could be affected, with up to six major refineries at risk.
Traders eye US-Iran talks and CPI for direction
With a light economic calendar this week, gold's price action is likely to stay rangebound unless there is a breakthrough in US-Iran negotiations or a fresh escalation. A breakthrough would likely ease inflation and rate-hike concerns and lift gold, while renewed escalation could trigger another strong selloff. On the daily chart, sellers are looking for a pullback into the major downward trendline to position for a drop toward 3,885. Buyers, meanwhile, need a break higher to target a rally toward 4,700, with 4,400 serving as a first target.
Catalysts this week include Wednesday's FOMC meeting minutes, Thursday's jobless claims figures, and Friday's University of Michigan consumer sentiment survey, with next week's US CPI print standing as the bigger risk for gold's next move.
Sources: Investinglive, Investing.com
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