Gold prices rebounded on Wednesday after nearly falling to a one-month low, as the US dollar and Treasury yields retreated from recent highs.
Spot gold gained as much as 1.2% during the morning session, pushing the precious metal back towards US$4,400 ($6,135) an ounce for the first time since early August.
In New York, the most-traded gold futures contract rose 0.7% to trade near US$4,450 an ounce.
The recovery followed a pullback in the US dollar and bond yields, which have been key sources of pressure on bullion in recent sessions.
Yields had climbed to their highest levels in nearly three years despite the US Treasury doubling its bond buyback program in an effort to contain long-term borrowing costs.
“Clearly, the energy complex and yields remain a major focus for the gold market moving forward,” High Ridge Futures Director of Metals Trading David Meger told Reuters.
Inflation fears led to sell-off
Bullion has come under renewed pressure since Federal Reserve Chair Kevin Warsh delivered a hawkish message at the Jackson Hole symposium last week.
Those concerns intensified following renewed tensions in the Middle East, which pushed energy prices higher and reignited fears that inflation could remain elevated.
Higher inflation increases the possibility of tighter monetary policy, while rising bond yields typically make non-yielding assets such as gold less attractive to investors.
However, Federal Reserve Bank of New York President John Williams said the recent rise in long-term bond yields was not being driven by inflation fears, but is rather a reflection of the strength of the US economy.
Jobs data in focus
Investors are now turning their attention to the US labour market for further clues on the Federal Reserve’s next move.
Private payroll growth came in below expectations in August, although markets are placing greater emphasis on Friday’s nonfarm payrolls report as a gauge of the strength of the economy and the outlook for monetary policy.
“ADP is unreliable and it might set the tone for non-farm, but non-farm is by far the most important one for markets,” StoneX Head of Market Analysis Rhona O’Connell said.
Traders are currently pricing in a 64% probability of an interest rate hike at the Fed’s policy meeting later this month, according to the CME FedWatch Tool.
Elsewhere, the Dutch central bank said it had transferred 86 tonnes of gold from New York and Ottawa to London over the past six months to “improve the tradability” of its reserves.
Write to Jackson Chen at Mining.com.au
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