Gold Prices Fall as Treasury Yields Rise on Fed Rate Hike Bets

Gold prices edged lower on Thursday, extending pressure from the previous session as rising Treasury yields, stronger oil prices and a firm U.S. dollar fueled expectations that the Federal Reserve may continue raising interest rates.

Spot gold (XAU/USD) fell 0.2% to $4,281.13 an ounce as of 01:58 ET (05:58 GMT), while gold futures declined 0.1% to $4,315.55. Silver dropped 0.6% to $64.09 an ounce. Platinum gained 0.3% to $1,758.69, while palladium rose 0.4% to $1,273.79. The U.S. Dollar Index held near 101.13.

Gold remains sensitive to the Fed interest rate outlook, particularly as elevated energy costs threaten to keep inflation above the central bank’s target. Higher interest rates typically pressure gold because the precious metal offers no yield.

Oil prices climbed after Iranian President Masoud Pezeshkian told the United Nations that Iran would not permit freedom of navigation through the Strait of Hormuz while U.S. sanctions and a blockade remain in place. He said Tehran remains open to negotiations but would not respond to threats.

His comments followed U.S. President Donald Trump’s statement that American officials had held “very good” discussions with Iranian representatives on the sidelines of the UN summit. Gold has fallen roughly 20% since the U.S.-Iran war began in late February, with oil prices and monetary policy expectations driving volatility.

Pressure on bullion also intensified after stronger-than-expected U.S. economic data and a weak Treasury auction triggered fresh bond selling. The five-year U.S. Treasury yield climbed above 5% for the first time since 2007.

U.S. business activity expanded at its fastest pace in more than five years, reinforcing concerns that inflation could remain persistent. Fed Governor Michael Barr said additional rate increases would likely be necessary to return inflation to the central bank’s 2% target.

Swap markets are now pricing in at least three Fed rate hikes by April next year. While longer-term demand continues to provide some support for gold, higher Treasury yields, resilient U.S. growth, elevated oil prices and a firm dollar are weighing on bullion in the near term.