Gold Extends Five-Day Gain as Lower Yields and Oil Ease Inflation Fears
Gold prices have extended their rally to five days, driven by falling US Treasury yields and easing Middle East tensions, signaling renewed investor appetite for hedges against sovereign debt risks.
Gold extended its rally to a fifth consecutive session, trading near $4,660 an ounce. The precious metal edged up 0.1% to $4,659.52 at 7:35 a.m. Singapore time, hovering close to a three-month high.
This momentum follows a weekly gain of more than 7%, fueled by a drop in US Treasury yields and declining oil prices. Yields fell by five to seven basis points across the curve on Tuesday as energy costs retreated on optimism surrounding Middle East de-escalation.
Iran and Oman recently held discussions to establish a temporary joint maritime corridor. These talks aim to allow some shipping to resume in the Strait of Hormuz, alleviating supply concerns that had previously supported crude prices.
The rally also reflects renewed interest in the debasement trade. After the US Treasury increased its buybacks of long-dated government debt, investors have turned to bullion to shield their portfolios from runaway budget deficits, avoiding sovereign debt and fiat currencies.
Lower energy prices further support gold by reducing the likelihood of aggressive monetary tightening. Federal Reserve Bank of Boston President Susan Collins noted she supports holding rates steady for now, assuming inflation continues progressing toward the central bank’s 2% target.
This stance is critical for non-yielding assets, as higher borrowing costs traditionally act as a headwind for bullion. Market participants are now closely monitoring the US Personal Consumption Expenditure Index due Wednesday for additional clues on the American economy.
Attention will also shift to the Jackson Hole symposium this Friday. Kevin Warsh is scheduled to deliver his first major speech as chairman of the Federal Reserve, offering potential insight into the central bank’s next policy moves.
Broader precious metals markets mirrored gold’s strength. Silver rose 0.3% to $68.83 an ounce, while palladium posted gains and platinum remained little changed. The Bloomberg Dollar Spot Index traded flat after a slight decline in the previous session.
