Gold Steadies as Easing US Bond Yields Reduce Rate-Hike Bets

(Bloomberg) -- Gold held a modest gain as US bond yields softened and Federal Reserve officials signaled they needed more time to weigh their next move on interest rates, even as a possible escalation in the Middle East kept energy costs elevated.

Bullion traded around $4,180 an ounce, holding a 0.5% rise from the previous session, but was on track to end the week around 2% lower. US Treasury yields eased across the curve on Thursday — with the 10-year retreating from a 24-year high — as concerns over France's fiscal outlook fueled demand for safe-haven assets. Higher yields are typically a headwind for bullion, which doesn't pay interest, and helped drive its 6% decline in September.

Fed Vice Chair Philip Jefferson said more time may be needed to assess whether further rate hikes are warranted, lowering bets in the market of an imminent increase. Traders now see the chances of a rise in October at around 27%, down from 70% earlier in the week.

Oil rose on signs the conflict in the Middle East may worsen, which threatens to hamper a recovery in energy flows from the region. The Pentagon may deploy an additional aircraft carrier and 10,000 sailors and Marines to the Persian Gulf, a US official said. This would take the number of carrier strike groups back to the same number as at the outset of the war against Iran in late February.

"Gold's quiet opening is more of a calm surface hiding the intense cross-currents underneath," said Senior Market Analyst Hebe Chen at Vantage Global Markets Pty Ltd. "Softer US inflation, fading expectations for another October Fed hike and the retreat in oil prices are giving bullion some breathing room, but persistently elevated Treasury yields and a firm dollar remain a heavy ceiling — keeping gold pinned around $4,100," she added.

Spot gold rose 0.1% to $4,182.20 an ounce at 8 a.m. in Singapore. Silver was up 0.3% to $61.14 an ounce, after gaining 0.9% the day before. Platinum and palladium edged higher. The Bloomberg Dollar Spot Index, a gauge of the US currency, was steady after a 0.4% increase in the previous session.