Gold Prices Fall as Surging Oil and Bond Yields Boost Fed Rate Hike Bets

Gold prices declined on Thursday, extending a sharp sell-off from the previous session as rising oil prices and a spike in U.S. Treasury yields bolstered bets that the Federal Reserve will continue to raise interest rates this year.

As of 9:31 AM ET, spot gold was down 0.3%, while gold futures fell 0.2%, according to Investing.com. The precious metal is highly sensitive to the outlook for interest rates, as higher rates increase the opportunity cost of holding non-yielding assets like bullion.

Hawkish Fed Bets Intensify

Investors are increasingly pricing in a more aggressive monetary policy path from the U.S. central bank amid persistent inflation pressures and signs of a resilient economy. The repricing follows recent data indicating that U.S. business activity in September expanded at its fastest pace in over five years.

According to the CME FedWatch Tool, traders now see a significantly higher probability of further rate hikes:

• The probability of an interest rate increase in October has jumped to approximately 77.5%, up from 55.4% just a week ago.
• The chance of another hike in December now stands at over 58%, compared to 41.7% last week.

Ad

Oil and Yields Add Pressure

The surge in hawkish sentiment is being driven in part by a rebound in energy costs. Benchmark Brent crude oil prices climbed back above $100 per barrel as hopes for a diplomatic resolution to tensions with Iran faded, according to the source report. Higher energy prices can contribute to sustained inflation, forcing the Fed to maintain a tighter policy stance.

This outlook triggered a significant sell-off in the bond market, placing further downward pressure on gold. The benchmark 10-year U.S. Treasury yield posted its largest single-day gain since April 2025, a period of market volatility linked to major tariff policies, the report noted. Bond yields and prices move in opposite directions.

Market Outlook

Looking ahead, market participants are monitoring geopolitical developments for their potential impact on commodity markets. Analysts at Britannia Global Markets highlighted an upcoming summit between U.S. and Chinese leaders, suggesting that a broader agreement could boost metals prices, while a breakdown in talks could reignite tariff risks and market uncertainty.