Gold steadies near $4 400 on reduced expectations for rate hike

Gold steadied near $4 400 an ounce as reduced prospects for an interest-rate hike by the Federal Reserve weighed on the US dollar, making bullion cheaper for most buyers.

Spot gold held most of the 1.5% gained over the previous two sessions, with a gauge of the dollar flat after dropping on Monday to its lowest since May. That followed a run of softer US economic data, with swaps no longer fully pricing in another rate increase by the Fed before the end of the year, as they were just a week ago.

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The softer dollar and lower rate-hike expectations are “potentially removing two of the headwinds that contributed to gold’s earlier correction,” Ole Hansen, head of commodity strategy at Saxo Bank AS, said in a note.

The yield on 30-year US Treasuries hit the highest in almost two decades, reflecting investor angst over surging government spending and a flood of long-dated bond sales, as well as inflation. That “creates an unusual but potentially supportive environment for gold,” said Hansen, as investors see bullion as a hedge against government debt burdens.

Still, the risk of monetary tightening — which is typically negative for non-yielding bullion — remains without any obvious prospects for peace in the Middle East. As fighting flared again in Lebanon, US President Donald Trump said he’s not interested in extending an interim truce with Iran signed in June. Tensions remain around the Strait of Hormuz, a key shipping route that remains disrupted due to attacks on vessels.

Gold’s recent recovery above the $4 000-an-ounce threshold has been supported by renewed investor demand and a recovery in central-bank buying, notably from China. The metal’s advance last week lifted it above the 100-day moving average for the first time since April, and prices continue to hover around that level.

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Traders will be studying minutes from the Fed’s July policy meeting, due for release Wednesday, for clues to the central bank’s rate path. Chairman Kevin Warsh’s remarks at the Fed’s annual Jackson Hole symposium later this month will also be closely watched.

Spot gold slipped 0.4% to $4 396.58 an ounce at 11:33 a.m. in Singapore. Silver fell 0.8% to $65.29 an ounce. Platinum and palladium retreated, while the Bloomberg Dollar Spot Index was flat after three straight days of decline.

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