Gold rallied alongside Treasuries as a slump in oil prices helped ease concerns about inflation, following the Federal Reserve’s first interest-rate hike since 2023. Bullion rose as much as 2.8 per cent, touching $4,380 an ounce, after three consecutive days of losses.
Treasury yields cooled, after spiking in the wake of the Fed's unanimous decision on Wednesday to raise rates by a quarter percentage point. The retreat lifted some pressure on gold, which usually performs worse when bond yields are high because it doesn’t pay interest.
Yields “are correcting from the overreaction” in the previous session, said Christopher Wong, strategist at Oversea-Chinese Banking Corp. That in turn has helped to support gold, he said, although “elevated yields and a firmer US dollar may continue to cap gold in the near term.” The Fed rate hike had been widely anticipated — and largely priced in — as rising energy prices due to the war in West Asia added to inflationary pressure.
Data released last week showed core US inflation rose at a hotter-than-expected pace in August. Oil slid from its recent highs on signs that supply disruptions in West Asia are set to ease, with Saudi Arabia seeking to partially restore flows along a vital pipeline.| Meanwhile, investors have continued to flock to bullion via gold-backed exchange-traded funds (ETFs).
ETFs tracked by Bloomberg have seen inflows for eight consecutive days.