NEW YORK: Gold extended gains on Thursday, buoyed by a drop in the US dollar and Treasury yields from highs, as investors awaited key payrolls data that could tip the scales on expectations for a Federal Reserve rate hike this month.
Spot gold was up 0.9percent at USD4,425.83 per ounce by 1046 GMT, while US gold futures rose 1.3percent to USD4,472. Bullion slipped to its lowest level since August 7 on Wednesday before settling more than 1percent higher as the US dollar index retreated from nearly three-week peak, while Treasury yields eased from multi-year highs. “Modestly weaker dollar, and slightly lower US rates are helping gold. With the Fed currently offering no forward guidance, gold remains highly sensitive to shifts in market expectations for the September meeting,” said UBS analyst Giovanni Staunovo.
Traders are pricing in about a 60percent chance of an interest rate hike at the Fed’s policy meeting later this month, according to the CME FedWatch Tool.
Rate hike bets increased after Fed Chair Kevin Warsh last week signalled that the central bank may need to hike rates if above-target inflation persists. Although gold is typically seen as an inflation hedge, higher interest rates tend to diminish non-yielding bullion’s appeal.
Investors now await the closely watched non-farm payrolls report due on Friday after the ADP employment report on Wednesday showed that US private payrolls increased moderately in August.
“The payrolls report will probably be the biggest defining moment of the week. If the jobs report misses expectations, and September rate hike bets decline, that could see gold move higher,” said Ilya Spivak, head of global macro at Tastylive.
Meanwhile, oil prices edged lower, with top aides of US President Donald Trump pushing to keep the Iran war from escalating before November’s midterm elections.
Among other metals, spot silver gained 0.5percent to USD65.61, platinum rose 0.2percent to USD1,763.88, and palladium climbed 1.4percent to USD1,363.56.
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