Gold rebounds sharply as U.S. borrowing costs ease

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Gold rebounds sharply

Highlights

Gold rises as Treasury yields retreat.
Strong bond demand supports bullion.
Fed rate uncertainty limits the outlook.

Spot gold traded at $4,192.12 an ounce, up 1.41%, while U.S. gold futures rose 1.49% to $4,218.90, according to the latest market readings. The gains followed Thursday's well-received auction of 30-year Treasury bonds, which helped reverse a rise in borrowing costs to multidecade highs, Bloomberg reports.

Treasury demand provides relief for gold

The U.S. Treasury auction attracted buyers after a prolonged decline in bond prices pushed yields to levels not seen in more than two decades. Stronger demand lifted Treasury prices and reduced yields across several maturities, easing one of the main pressures on bullion. Because gold generates no interest income, higher bond yields generally make it less attractive compared with interest-bearing government securities.

The decline in yields encouraged investors to return to gold after its recent selloff. A modest weakening of the U.S. dollar also provided support by making dollar-denominated bullion less expensive for buyers using other currencies. The recovery extended across precious metals, with silver, platinum, and palladium also advancing, although gold remained sensitive to changes in bond-market expectations.

Federal Reserve policy remains a source of uncertainty

Despite the rebound, investors remain concerned that persistent inflation could require the Federal Reserve to maintain restrictive monetary policy. St. Louis Fed President Alberto Musalem indicated Thursday that interest rates may need to rise over the next six to nine months to bring inflation back toward the central bank's 2% target. He did not explicitly support an increase at the October meeting.

Traders largely expect the Fed to leave borrowing costs unchanged later this month, but the prospect of higher rates afterward presents a challenge for gold. A renewed increase in Treasury yields could reduce demand for bullion, particularly if inflation data reinforce expectations that monetary tightening will continue.

Geopolitical developments add to market uncertainty

Gold's recovery also coincided with easing oil prices after President Donald Trump ruled out further U.S. attacks on Iran before the November midterm elections. The announcement reduced immediate concerns about another military escalation, although the broader conflict and restrictions on regional energy shipments remain unresolved.

For gold investors, the next important test will be whether lower Treasury yields persist. The latest rally has lifted spot prices above $4,190, but its durability depends on inflation expectations, the dollar and the Fed's response to economic conditions. Strong demand for government bonds has provided short-term relief; a lasting recovery would require more stable borrowing costs.

Earlier, we reported that gold remains under pressure after 6% September drop.

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