Gold ends 2-week losing streak at $4,216

Gold ended its 2-week losing streak with its latest close at $4,216.30, while expectations that the Federal Reserve (Fed) could postpone interest rate hikes and a retreat in bond yields brought a recovery to global commodity markets. Signals of a cooling observed in the US labor market strengthened the likelihood that the policy rate will be kept unchanged at the October meeting. As buying in precious metals gained momentum under the effect of this picture, spot gold completed the week with a 1.3% rise. Moving within a band of $4,156.10 to $4,233.70 on the final trading day, the ounce price, compared to the $4,157.00 level in the previous session, gained 1.43% on a daily basis.

Having peaked midweek at 5.36%, the US 10-year Treasury yield, following the US Treasury's $6 billion bond buyback that eased selling pressure, closed the week at the 5.25% level. The easing in bond yields supported the recovery by lowering the opportunity cost of holding non-interest-bearing precious metals.

Meanwhile, the dollar index rose 0.3% on a weekly basis to the 102.2 level. Although the minutes of the Fed's September 15-16 meeting revealed that most officials deemed an additional rate hike appropriate by the end of the year, Fed Governor Christopher Waller, speaking at the Istanbul Economic Forum, stated that it is not mandatory to hike at every meeting to bring consumer price inflation (CPI) down to the 2% target and that there is flexibility in the timing of steps.

How did Fed expectations affect gold and silver?

In the precious metals basket, silver rose 2.73% at the latest close to reach the $61.05 level, posting a 0.7% gain on a weekly basis. Trading in a range of $59.45 to $61.46 during the day, silver had closed the previous session at the $59.42 level. On the central banks side, China increasing its gold purchases in September to extend its uninterrupted buying streak to the 23rd month was among the primary factors supporting physical demand. During the same period, palladium fell 1.6% on a weekly basis, while platinum declined 0.5%.

How did the decline in bond yields reflect on commodities?

Developments in the Middle East and hurricane-related production disruptions led to an increase in oil and natural gas prices, while Chinese demand and supply constraints came to the fore on the industrial metals side. The Yangshan premium, which measures China's imported copper demand, rose to $125 per ton on October 8, reaching its highest level since November 2022; a strike at the Centinela mine in Chile also triggered supply risks.

Rising energy costs in global markets and the strong dollar index climbing to 102.2 points keep consumer price inflation (CPI) pressures alive in emerging markets that are net energy importers like Turkey through production cost and exchange rate channels. While the increase in the energy bill poses a risk factor for industrial production and the foreign trade balance, data-driven uncertainties regarding the Fed's interest rate path continue to keep global liquidity conditions delicate.

This content is for information purposes only and does not constitute investment advice.