Gold Prices Bounce Back
Gold Rebounds as Falling Treasury Yields and Weaker Dollar Offset Fed Rate Pressures
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Key Points
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Gold-backed exchange-traded fund holdings recorded net inflows for an eighth consecutive day, bringing total global holdings to 100.39 million ounces, or 1.44 million ounces higher year to date.
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U.S. 10-year Treasury yields fell to about 4.93% after briefly exceeding 5% earlier in the week, helping reduce pressure on gold despite the Fed’s tightening signals.
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Analysts at Pepperstone expect gold to remain rangebound while its earlier bull market pauses, although they believe central-bank demand could eventually help the uptrend resume.
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The Federal Reserve’s quarter-point rate increase was its first hike since 2023 and was approved unanimously, while Treasury yields declined across maturities after initially spiking in response to the decision.
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David Meger of High Ridge Futures said gold has been closely inversely correlated with energy prices because of their effect on inflation expectations: “Energy prices are down fairly dramatically today. So it’s these lower energy prices that are removing some of that pressure on the gold market.”
Gold bounced back to near $4,350 an ounce after tumbling following the Federal Reserve's first rate hike since 2023. The rally VT Markets Rio Times Online was powered by falling oil prices, a weaker dollar, and Treasury yields retreating from 5% — all factors that ease pressure on the non-yielding metal despite the Fed's tightening signal.
In domestic markets, Delhi gold jumped ₹1,600 to ₹1.566 lakh per 10 grams, while silver climbed ₹5,000 to ₹2.47 lakh per kilogram Rio Times Online. The bounce came despite markets pricing a 53% chance of another Fed rate hike in October, showing investors are betting that cheaper energy and central bank buying will support gold prices going forward.
Fed Rate Hike Triggers Initial Panic, Then Recovery
The Federal Reserve approved a quarter-point rate increase to 3.75%-4% on Wednesday VT Markets, its first hike since 2023. Gold initially crashed to a near two-month low of $4,235 as investors feared rising rates would make the non-yielding metal less attractive VT Markets. Treasury yields spiked above 5% on the news FX Daily Report.
By Thursday, gold had reversed course and surged over 2%, climbing back toward $4,380 Rio Times Online. The shift happened as traders realized falling oil prices — not rising rates — would dominate the week's narrative. David Meger of High Ridge Futures explained: High Ridge Futures "Energy prices are down fairly dramatically today. So it's these lower energy prices that are removing some of that pressure on the gold market."
Oil Retreat and Middle East Easing Support the Metal
Oil prices plummeted after Saudi Arabia signaled it would restore capacity in its East-West pipeline TMGM. Fears of Middle East shipping disruptions and supply shortages eased, removing a major inflation pressure. When energy prices fall, it signals inflation may cool — and investors don't need gold as an inflation hedge anymore.
Simultaneously, U.S. Treasury yields retreated to 4.93% VT Markets, down from peaks above 5%. A weaker dollar also emerged VT Markets, making gold cheaper for foreign buyers. These three shifts — lower oil, lower yields, weaker dollar — created a rare window where gold could rally despite the Fed's tightening bias.
ETF Inflows and Central Bank Buying Provide Floor
Gold-backed exchange-traded funds showed net inflows for an eighth straight day, bringing total global holdings to 100.39 million ounces — up 1.44 million ounces year-to-date. This steady institutional buying suggests large investors view current prices as attractive despite the Fed's rate hike Rio Times Online.
Analysts at Pepperstone said gold is rangebound for now but central bank demand will eventually resume the broader bull market TMGM. "The large bull market we had seen earlier in the year is considered on pause," they noted. The message: higher rates and yields cap gains, but structural support from institutional and official buyers prevents a collapse.
Rate Hike Odds Climb But Gold May Stay Rangebound
Markets are now pricing a 53% chance of another Fed rate increase at the October meeting. Elevated Treasury yields (~4.93%) and a stronger dollar remain headwinds for non-yielding bullion. But the recent rally shows gold can still find buyers when energy inflation fears ease, even if rates are rising.
Investors face a crossroads: will the Fed continue tightening, or will moderating inflation pressure it to pause? FX Daily Report Gold's near-term direction depends on that answer. For now, spot gold near $4,350 represents a holding pattern — not a breakout, but not a crash either.
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