Gold prices rose in early trading Thursday while silver declined sharply as oil prices climbed and Treasury yields remained near multi-decade highs, keeping inflation and interest-rate risks in focus.
At the time of writing, spot gold was trading at $4128 an ounce, up around 0.40% on the day. Spot silver fell close to 1% and was trading around $59 an ounce.
The broader market also came under pressure. The Dow Jones Industrial Average fell 181 points, or 0.4%, while the S&P 500 declined 0.4% and the Nasdaq Composite slipped 0.5%.
Investors were assessing the risk of further Federal Reserve rate increases as inflation pressures remained elevated. Weekly jobless claims released Thursday provided another important data point for markets.
Jobless claims beat expectations
Initial jobless claims declined by 2,000 from the previous week to 197,000 for the week ending October 3, below expectations of 200,000.
On a four-week rolling basis, average jobless claims also declined, falling from 200,500 to 198,000.
Stronger-than-expected labor-market data can weigh on gold as resilient employment conditions may increase the possibility of higher interest rates.
Earlier, September nonfarm payrolls came in at 29,000, far below the forecast of 90,000.
The weak employment reading gave investors some relief as speculation about another rate hike in October eased. Softer employment numbers reduce the risk of a rate hike, helping bullion.
Oil adds to inflation pressure
Rising oil prices have emerged as another headwind for bullion.
Brent crude futures rose more than 4% on Thursday to above $105 a barrel, while West Texas Intermediate crude climbed more than 4% to above $92.
The sharp increase came as concerns about supply disruptions intensified. President Donald Trump said he no longer wanted a deal with Iran, while reports emerged that the US was planning a major offensive.
The number of tankers crossing the Strait of Hormuz also fell sharply on Tuesday, according to Kpler data, as attacks on commercial vessels increased.
Higher oil prices can add to inflation pressures, which in turn can increase expectations for higher interest rates.
That creates a headwind for bullion, which does not generate interest income. However, gold’s demand stayed strong on Thursday even as silver struggled.
Yields keep pressure up
Treasury yields have remained elevated as investors reassess the outlook for inflation and monetary policy.
The combination of firm inflation expectations, higher oil prices and elevated Treasury yields could continue to pressure gold and silver.
The market will also be watching bond-market demand and incoming economic data for further signals on the Federal Reserve’s policy path.
Further signs of persistent inflation, weak Treasury auction demand, or another oil-driven rise in yields could keep pressure on bullion.
Softer labor-market or sentiment data, meanwhile, could provide support for precious metals by easing expectations for additional rate increases.
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