Gold Hits 10-Week Low as Bond Yields Soar Above Rising Inflation

GOLD PRICES sank in London on Wednesday, hitting the lowest Dollar value since early August as interest rate forecasts and longer-term yields rebounded on strong US inflation data.

With US interest-rate expectations soaring, the Dollar jumped 0.5% against other major Western currencies to hit a fresh 19-month high on its DXY index.

Crude oil held firm above $100 per barrel as the Houthi-Saudi conflict worsened, Iran attacked oil tankers in the Strait of Hormuz, and energy-giant Russia again bombarded civilian targets in Ukraine after US President Trump lifted sanctions on Moscow's exports of diesel and was accused of blocking Kyiv from US military intelligence again.

The price of gold in contrast sank $75 per troy ounce to $4079 before setting the lowest London 3pm benchmark price in nearly 10 weeks around $4090.

Today's first estimate from the Bureau of Labor Statistics said US inflation on the Consumer Price Index accelerated in September to its fastest year-on-year pace since May, beating analysts' consensus forecasts at 3.7% headline and 2.6% on the 'core' measure, which excludes fuel and food.

But with US government borrowing costs rising the fastest in 3 years to multi-decade highs last month, that increase in the CPI still put the yield offered to investors by 10-year US Treasury bonds − the benchmark for government and many commercial borrowing costs − at the highest real rate above core inflation since June 2007, eve of the global financial crisis.

Adjusted by core inflation, gold back then cost $1047 per ounce in 2026 terms.

Alongside gold today, Western government bond prices all fell again on September's US inflation news, down from near 3-week highs to push up the yield offered by 2-year US Treasury debt sharply higher to 4.92% per annum, more than 1 percentage point above the Federal Reserve's current overnight interest rate target of 3.88%.

Betting in the futures market also jumped to put an evens shot on the Fed raising its key rate again at this month's monetary policy meeting, with market-based forecasts for December 2027 now predicting a level of 4.76% by the end of next year according to derivatives exchange the CME's FedWatch tool.

New York's stock market opened the day lower and European bourses cut earlier gains.

Asian stock markets had already fallen overnight, taking China's CSI300 to a new 15-month low 16.6% beneath late-June's 4.5-year high.

Silver meantime sank more than $2 per troy ounce on the US CPI inflation news, touching its lowest London spot price in 12 weeks at $56.58 before rallying with gold to trade back above $57.

Having ended September at 5.29% per annum, the yield offered by 10-year US Treasury bonds today jumped from 5.18% to 5.31%, retouching last week's new 24-year high in Washington's borrowing costs before slipping 2 basis points.