What happened to gold
Gold slipped as traders stepped up wagers on more Fed tightening to fight stubborn inflation. The metal traded close to a one year low around $3,880 an ounce after a near 3 percent drop that included a short dip to a 13 month low in the prior session.
On Thursday, yields across portions of the Treasury curve climbed more than 12 basis points, led by the shortest maturities that typically respond most to policy changes. The jump continued a move that began Tuesday.
Why markets reacted
The extension followed faster than expected consumer price gains and statements from Fed officials backing a tougher stance. Chicago Fed President Austan Goolsbee said the central bank must move to rein in prices ahead of the economy overheating. San Francisco Fed President Mary Daly said additional interest rate hikes will probably be required to bring down inflation "that isn't simply in the sectors that are most directly affected by tariffs or oil."
Higher borrowing costs hurt gold because it does not generate interest. Traders now price a quarter point hike next month with an outside chance of a half point, and some expect increases to stretch past December.
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Oil complicates the picture
Inflation concerns were reinforced by rising oil after President Donald Trump cooled hopes for a diplomatic opening with Iran. Brent climbed toward $96 a barrel on Thursday after he stated the U.S. did not require an agreement with Tehran, and he also left open the possibility of military strikes.
Gold and oil have often moved in opposite directions since the US Iran war disrupted energy flows and pushed up prices worldwide, leading central banks to pursue tighter policy.
Where this leaves your portfolio
As of 7:57 a.m. Singapore time, spot gold was up 0.1 percent at $3,881.02 per ounce, with silver up 0.2 percent to $50.11. Platinum and palladium also edged higher. The Bloomberg Dollar Spot Index finished the prior session up 0.2 percent.
In plain English: rates, the dollar, and oil are steering metals right now. Keep an eye on how policy expectations and energy prices evolve, because they are setting the tone for gold.
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