Gold prices edge lower amid higher oil prices, bond yields

Gold prices edged lower on Thursday, extending a sharp selloff in the previous session, dragged down by growing bets on more Federal Reserve interest rate hikes this year. 

By 09:31 ET (13:31 GMT), spot gold had fallen by 0.3% to $4,275.09 an ounce, while gold futures had declined by 0.2% to $4,310.60 an ounce.

Gold has been sensitive to the Fed’s rate outlook, as investors assess whether an energy-price shock will keep inflation elevated and require further policy tightening. Higher rates tend to weigh on gold because the metal pays no interest.

Benchmark Brent oil prices have risen back above $100 a barrel, as hopes faded for an imminent diplomatic resolution to the Iran war.

Iranian President Masoud Pezeshkian told the United Nations that Iran would not allow freedom of navigation through the Strait of Hormuz while a U.S. blockade and sanctions remain in place.

Previously, President Donald Trump said his team had held “very good” talks with Iranian envoys on the sidelines of the United Nations General Assembly gathering -- although he earlier threatened Iran with "annihilation."

Along with the renewed jump in oil prices, investors were assessing data which showed that U.S. business activity expanded at its fastest pace in more than five years in September. 

Faced with the prospect of stubborn energy-fueled inflationary pressures and resilient U.S. growth, traders now see a roughly 77.5% probability of a rate hike in October, up from 55.4% a week ago, according to CME FedWatch. The chances of another borrowing-cost increase in December now stand at over 58%, compared to 41.7% last week.

This hawkish repricing sparked a steep selloff in bond markets, placing further downward pressure on gold. The benchmark U.S. 10-year Treasury yield, which moves inversely to prices, logged its biggest jump since April 2025, when markets were reeling from the introduction of Trump’s sweeping Liberation Day tariffs.

At its September meeting, the Fed raised rates by 25 basis points, citing a desire to quell mounting inflation. In theory, lifting rates can put a lid on price gains, albeit at the risk of weighing on growth.

Elsewhere, analysts at Britannia Global Markets noted that the importance of a key summit between Trump and Chinese President Xi Jinping later today, arguing that a "broader deal or concessions on critical-mineral flows" could lift metals, while "a breakdown would revive tariff risk."

"Watch the communique for metals-specific language," they said.