Gold Steadies After September's 6% Drop as PCE Data Eases Rate Fears
Gold prices held steady as softer U.S. PCE inflation data reduced expectations for further Federal Reserve rate hikes.
Gold prices were little changed at the start of October following a bruising September that saw the precious metal shed approximately 6% of its value, one of its steeper monthly declines in recent memory. The stabilization came as traders reassessed their outlook for U.S. monetary policy after fresh inflation data offered a degree of relief.
The catalyst for the modest reprieve was a softer-than-expected reading on the U.S. Personal Consumption Expenditures index, the Federal Reserve's preferred gauge of inflation. The cooler PCE figures prompted investors to pare back bets that the central bank would deliver additional interest rate increases in the near term, easing one of the principal headwinds that had weighed on non-yielding assets like gold throughout the previous month.
Read more U.S. Bond Yields Surge at Fastest Pace in Decades Amid Global Rout →
Gold is particularly sensitive to shifts in rate expectations because higher borrowing costs raise the opportunity cost of holding bullion, which generates no yield. The sustained rally in U.S. Treasury yields and a stronger dollar during September had combined to pressure gold prices, pushing them toward multi-month lows before the latest data provided some breathing room.
Market participants remain cautious, however, as the Federal Reserve has signaled a data-dependent approach and has not ruled out further tightening if inflation proves stickier than anticipated. Any renewed upside surprise in upcoming economic indicators could quickly reignite selling pressure on the metal.
Continue reading at All News.
