Gold fell on Thursday, as investors booked profits after prices climbed to a more-than-two-month peak following a surprise U.S. Treasury liquidity-support announcement for long-duration bonds that weakened the dollar and pushed Treasury yields lower.
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Gold prices retreated on Thursday after gaining more than 4% in the previous session, as a surprise U.S. Treasury liquidity move pushed bond yields and the dollar lower while rising oil prices and hawkish Fed signals prompted profit-taking.
Spot gold fell 0.9% to $4,479.12 an ounce. Earlier, bullion was at $4,525.79 after prices climbed to a more than two-month peak on Wednesday. U.S. gold futures edged 0.2% lower to $4,535.70.
The U.S. Treasury Department said on Wednesday it would double the size of its liquidity-support buyback operations for longer-dated notes and bonds, helping ease pressure in the bond market.
The U.S. dollar was hovering near three-month lows. “I would describe this morning’s lower prices as a short-term correction rather than the beginning of a broader downward trend,” ActivTrades senior analyst Ricardo Evangelista said.
“Over the coming weeks, the outlook will depend largely on expectations for Federal Reserve policy and developments in the Persian Gulf,” he said.
Minutes from the Fed’s latest meeting showed inflation concerns had deepened, with several policymakers prepared to raise interest rates.
Oil prices hit three-week highs on Thursday over fears the U.S.-Iran war impasse will keep disrupting Middle East supply, after President Donald Trump warned of economic consequences against any nation offering Iran “any type of lifeline.”
Meanwhile, total U.S. debt outstanding topped $40 trillion for the first time, drawing fresh warnings of a fiscal crisis.
Traders are currently pricing in a 67% chance of a Fed hold in September, according to the CME FedWatch Tool.
Morgan Stanley expects gold to exceed $5,000 an ounce in 2027, potentially sooner, as it sees the Fed staying on hold, but said U.S. inflation data could drive volatility while low COMEX short positions limit scope for further short-covering gains.
Although gold is generally viewed as an inflation hedge, rising interest rates tend to reduce the appeal of the non-yielding metal.
Among other metals, spot silver fell 0.4% to $66.63 per ounce, platinum dropped 0.5% to $1,815.57 and palladium slid 0.1% to $1,331.00.