(RTTNews) – Gold prices fell on profit taking Thursday after rising sharply in the previous session following a surprise liquidity support announcement by the U.S. Treasury to stem a rout in the bond market.
Spot gold fell 0.8 percent to $4,486.71 an ounce after surging more than 4 percent on Wednesday and hitting its highest level since June 2 at $4,527.67 earlier in the day, driven by a slide in the dollar and easing pressure from the bond market. U.S. gold futures were little changed at $4,545.01 an ounce.
Global bond yields fell and the U.S. dollar index held near three-month lows after an announcement by the Treasury Department that it would buy back more longer-term debt, covering maturities of between 10 and 30 years in a bid to keep borrowing costs in check.
The U.S. Treasury Department’s move to buy back more long-term debt cooled a bond sell-off, but critics warned it could accelerate inflation and put pressure on the Fed to support fiscal objectives.
With the Fed and the Treasury working in sort of opposite directions, analysts say that the Fed may be forced to raise interest rates more aggressively rather than leave then unchanged, if inflation stays flat or rises.
Traders were also reacting to the release of the Federal Reserve’s July meeting minutes, which showed growing concern over inflation and a divided policy committee. Many officials saw the scope for higher interest rates if inflation doesn’t soon slow.
On the geopolitical front, Brent crude prices climbed more than 2 percent to $93.78 a barrel, extending gains for a fifth consecutive session as U.S.-Iran talks remained deadlocked and U.S. President Donald Trump sharpened his rhetoric against Tehran, warning of economic consequences against any country that provided “any type of lifeline to Iran.”
Asked about the Iran war, Trump reiterated that the U.S. has “complete control” of the Strait of Hormuz and that the talks could resume “maybe at some point.”
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