Gold surges along with US treasuries as oil price slide deepens

Gold rallied alongside Treasuries as a slump in oil prices helped ease concerns about inflation, following the Federal Reserve’s first interest-rate hike since 2023.

Bullion rose as much as 2.8%, touching $4 380 an ounce, after three consecutive days of losses. Treasury yields cooled, after spiking in the wake of the Fed’s unanimous decision on Wednesday to raise rates by a quarter percentage point. The retreat lifted some pressure on gold, which usually performs worse when bond yields are high because it doesn’t pay interest.

Yields “are correcting from the overreaction” in the previous session, said Christopher Wong, strategist at Oversea-Chinese Banking Corp. That in turn has helped to support gold, he said, although “elevated yields and a firmer US dollar may continue to cap gold in the near term.”

The Fed rate hike had been widely anticipated — and largely priced in — as rising energy prices due to the war in the Middle East added to inflationary pressure. Data released last week showed core US inflation rose at a hotter-than-expected pace in August.

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But oil slid from its recent highs on signs that supply disruptions in the Middle East are set to ease, with Saudi Arabia seeking to partially restore flows along a vital pipeline.

Meanwhile, investors have continued to flock to bullion via gold-backed exchange-traded funds. ETFs tracked by Bloomberg have seen inflows for eight consecutive days.

Demand for options on some of the largest gold-backed ETFs has been similarly strong. The largest such fund, SPDR Gold Shares, recently saw the highest level of outstanding call options since the early weeks of the year. The outstanding contracts can amplify volatility in bullion, as dealers rush to hedge by buying ETFs when prices rise and selling when prices fall.

A trader nearly doubled a $3.2 million bearish gold-options bet within hours on Wednesday, after buying 80 000 put spreads on the SPDR Gold Shares ETF and unwinding them as bullion fell during and after the Fed press conference.

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Spot gold was up 2.3% to $4 360.92 an ounce at 2:13 p.m. in London. Silver climbed 3.8% to $65.38 an ounce. Platinum and palladium also advanced. The Bloomberg Dollar Spot Index, a gauge of the US currency, was 0.1% lower after rising 0.5% on Wednesday.

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