Gold advances after slump to one-year low attracts dip buying

Detailed summary

Spot gold was 0.8% higher at $3 909.30 an ounce as of 10:49 a.m. Singapore time, while silver rose 1.1% to $50.56.

Gold advanced as investors with a long-term bullish view on bullion bought the dip after the precious metal tumbled to the lowest level in more than a year in the previous session.

Bullion rose as much as 1% to trade near $3 920 an ounce, after briefly hitting a 13-month low on Thursday as investors ramped up bets on the Federal Reserve raising interest rates. Yields on some Treasuries surged by more than 12 basis points in the previous session, with the biggest increases seen in short-term securities that are more sensitive to changes in central bank policy.

The decline “at the end of the New York session was concerning but correlated well with the rising bond yields,” said Rajeev De Mello, global macro portfolio manager at GAMA Asset Management SA. Friday’s gain “can only be explained by reserve managers stepping in,” after gold slipped below $4 000 an ounce earlier this week, he added.

Gold previously tested that key psychological level in July and again in late October, with demand from long-term investors such as central banks and large institutional buyers, along with Chinese households, supporting prices. Still, futures are heading for a weekly loss.

Bullion slumped more than 6% over the previous three sessions, triggered by a faster-than-expected increase in consumer prices and comments from Fed officials who support more aggressive tightening by the central bank. Higher borrowing costs weigh on gold, as it doesn’t pay interest.

Traders are pricing in a quarter-point rate increase from the Fed next month, with an an outside chance of a half-point move. Some also see hikes extending beyond December.

Federal Reserve Bank of New York President John Williams and Chicago Fed President Austan Goolsbee both said on Thursday that inflation remains high. San Francisco Fed President Mary Daly said further interest-rate increases will likely be needed to bring down inflation “that isn’t simply in the sectors that are most directly affected by tariffs or oil.”

Gold and oil…

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