Gold increases as Fed remarks suggest a possible end to US rate increases

11 Oct 2023 , 09:33 AM

The dollar fell on Wednesday as comments from U.S. Federal Reserve members suggested that a recent jump in Treasury yields would lessen the need for further rate hikes. Gold prices maintained close to their highest levels in more than a week.

Following a Tuesday high of $1,860.97 per ounce, spot gold was up 0.1%. American gold futures remained steady at $1,874.50.

The dollar fell to its lowest point versus a basket of currencies in almost two weeks, following a decline in U.S. Treasury yields in response to dovish remarks made by numerous Fed officials.

Neel Kashkari, president of the Minneapolis Fed, said on Tuesday that it’s ‘possible’ that the recent increase in longer-term Treasury yields means the Fed won’t need to hike interest rates as much as it would otherwise.

Raphael Bostic, president of the Atlanta Federal Reserve, stated that the U.S. central bank need not increase borrowing prices further and does not anticipate a recession.

According to San Francisco Fed President Mary Daly, since U.S. inflation has declined from its peak, the danger of raising interest rates too little no longer exceeds the risk of boosting them too much.

Gold is priced in dollars and does not pay interest, thus higher rates increase the opportunity cost of owning the metal.

Rising interest rates on government bonds might jeopardize the plans of elected leaders and central bankers who believed they had prepared the groundwork for a sustained period of continuous expansion, low unemployment, and progressively declining inflation. This is true even as the U.S. economy surges forward.

The largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, said Tuesday that its holdings decreased.

Spot silver increased by 0.1% to $21.84 an ounce, platinum by 0.2% to $882.21, and palladium by 0.1% to $1,170.46.

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