Gold Extends Losses on Fed Rate-Hike Fears, Holds Near $4,290

Gold remained under pressure as rising oil prices and solid U.S. economic data fueled concerns that the Federal Reserve may raise interest rates further.

Bloomberg reported that spot gold traded at $4,290.29 an ounce as of 8:08 a.m. Singapore time on September 23, up 0.1% from the previous day. Still, it hovered around $4,290 after plunging 1.7% in the prior session.

A key weight on gold is the prospect of additional Fed tightening. Renewed tensions between the U.S. and Iran have pushed oil prices higher, while stronger-than-expected U.S. economic data have added to inflation concerns. Gold, which does not offer interest income, typically becomes less attractive when rates rise.

U.S. Treasury yields also climbed sharply. Strong economic data and weak Treasury auctions helped drive yields on most maturities to their highest levels in about 20 years. The five-year Treasury yield in particular rose above 5% for the first time since 2007.

U.S. economic activity expanded at the fastest pace in more than five years. S&P Global's flash U.S. composite purchasing managers index for September came in at 58.4, the highest since July 2021. The reading reflected gains in new orders and employment across manufacturing and services.

Fed officials have also raised the need for further tightening. Federal Reserve Governor Michael Barr said additional rate increases will likely be needed to bring inflation back to the central bank's 2% target. Interest-rate swaps are pricing in at least three more rate hikes by April next year.

Gold has fallen about 20% since the war between the U.S. and Iran began in late February. At the same time, spot silver fell 0.2% to $64.31 an ounce, while platinum and palladium also edged lower.