World gold prices recovered slightly in Thursday afternoon's trading session, after leaving the two-week high achieved in the previous session. According to RIA Novosti/Prime, the ongoing conflict in the Middle East has increased energy prices and inflationary pressure, thereby strengthening expectations that interest rates may be raised.
Oil prices and bond yields go up together
Pressure on gold increased as the USD strengthened and US Treasury bond yields rose.
The USD rose 0.3%, making gold more expensive for buyers using other currencies. Meanwhile, the yield on 10-year US Treasury bonds rose to its highest level in more than a year.
RIA Novosti/Prime quoted Mr. Jim Wyckoff - senior technical analyst at Kitco - as saying that rising crude oil prices are pulling bond yields up, in the context of the market believing that inflation may make it difficult for central banks to lower interest rates.
According to Mr. Wyckoff, the increase in bond yields is a disadvantageous factor for gold and silver because these two precious metals do not generate interest income.
On the energy market, Brent oil prices touched $100/barrel for the first time since the end of May. This development appeared after Houthi forces in Yemen attacked two Saudi Arabian oil tankers, raising concerns about the risk of oil supply disruption.
Fed probability of raising interest rates in September to 83%
After strong fluctuations in the gold and energy markets, investors' attention is now directed towards the policy meeting of the US Federal Reserve (Fed) next week.
Investors are waiting for interest rate decisions and statements from Fed Chairman Kevin Warsh after a two-day meeting.
According to data from CME Group's tool quoted by RIA Novosti/Prime, traders are valuing 83% of the Fed's ability to raise interest rates in September, up sharply from 68% on Wednesday.
RIA Novosti/Prime quoted Mr. Jim Wyckoff as saying that the market generally does not expect interest rates to change at the upcoming meeting. However, the possibility of the Fed sending "hawkish" signals is still being considered.
According to experts, no matter what the final decision, the market will react to the signals given.
